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Sat, 25th February 2017

Anirudh Sethi Report

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Archives of “united states” Tag

Traders Throw In The Towel On March Rate Hike

As we previously noted, while speculatrs had been reducing their shorts in Treasury futures, they had added to Eurodollar shorts – pushing their bets on Fed rate hikes to record highs. However, as Bloomberg notes, signals are starting to emerge that traders who built up that heavy short, or hawkish, eurodollar base since the start of 2016 could be starting to throw in the towel on a March Fed rate hike.

CME confirmed that Wednesday saw record volume in fed fund futures of 658.7k contracts, beating the previous record of 613k on Nov. 9, the day after the U.S. presidential election. Over the course of Wednesday’s session, a total of 283k Apr fed funds futures contracts traded, largest single-day volume seen in the contract. Open interest in the contract rose by 109k, suggesting some short covering before the minutes and potential new longs after the minutes.

How Much Must A Family Earn To Live In Each Major US City

London-based realtor Nested produced the 2017 Rental Index in conjunction with their recent Real Estate Index. The study illustrates the price of renting per square foot in 10 major US cities and a number of metropolises worldwide. The research conveys the minimum gross salary required to support an individual and a family of four in rented property based on the minimum space recommended for one person, and for four people respectively.

Some of the key findings:

  • The top three most expensive cities to rent in worldwide are American: San Francisco, New York City and Boston
  • At $1.09 per square foot, Detroit is the cheapest of the American cities included, and is more affordable than Cape Town, Bangkok and Jakarta.
  • New York City and San Francisco are five times more expensive than Detroit, and three times more expensive than Houston

The study was undertaken to understand the costs associated with renting as an individual and as a family, and to determine whether cities are becoming increasingly unaffordable. The inclusion of the global ranking alongside the US ranking allows easy comparison between the two, and illustrates the relative unaffordability of major US cities compared to other global settlements.

The price per square foot of property was calculated based upon current market listings for all locations researched, while the minimum space recommended for one person and four people is laid out in guidelines from an urban planning authority. The gross salary guideline was included to help illustrate relative affordability.

Greece facing fresh junking without bailout cash, warns Fitch

Greece is at risk of being downgraded further into junk territory should its creditors fail to resolve their latest set of differences over the country’s bailout this month, one of the world’s leading rating agencies has warned.

Ahead of its next decision on Greece in less than two weeks, Fitch Ratings said its current “CCC” junk rating on Greece was contingent on the country securing a successful injection of its latest tranche of bailout cash “well ahead of July” when it faces a major a €7bn repayments crunch.

The warning comes as finance ministers are due to thrash out their differences at a meeting in Brussels on February 20 – their last major discussion before a raft of eurozone elections beginning with the Netherlands in March and ending with Germany in September.

Fitch is due to make its next rating decision days after this month’s meeting of the Eurogroup on February 24. Greece has been unable to raise fresh funding on international markets since 2014, undergoing a fresh €86bn bailout in the summer of 2015 having been bought to the brink of default and introducing capital controls on its banking system.

A rating downgrade would also scupper the Syriza government’s ambitious plans to return to the bond markets before the end of its bailout in the summer of 2018.

Japan resurfaces as No. 2 contributor to US trade deficit

Japan accounted for $68.9 billion of the U.S. trade deficit on goods in 2016, re-emerging as the second-largest contributor for the first time in three years for a potential flashpoint when the leaders of the two nations meet Friday.

The overall U.S. trade deficit on goods shrank by 1.5% to $734.3 billion last year on a Census basis, according to Department of Commerce data released Tuesday. Exports fell 3.2% to $1.45 trillion on a strong dollar, but imports decreased 2.6% to $2.18 trillion.

 The country logged a $247.8 billion surplus on services, bringing the overall U.S. trade deficit to $502.3 billion on a balance of payments basis.

The goods deficit with Japan remained roughly flat and accounted for 9% of the U.S. total. The deficit on motor vehicles and parts — an area in which President Donald Trump claims Japan engages in unfair practices — jumped to $52.6 billion from $48.9 billion in 2015, making up nearly 80% of the total American deficit with Japan.

Japanese automakers are increasing production in North America. But cars sold from Japan to the U.S. tend to be higher-end models, and the average price per unit is rising.

China was the top contributor to the U.S. trade deficit on goods, accounting for $347 billion, or 47%. Germany ranked third and Mexico fourth. Trump, seeking to curb the deficit, has accused Japan, China and Germany of manipulating their currencies. The president also demands a renegotiation of NAFTA with Mexico.

Beijing Blasts Washington for Plans to Launch High Taxes on Chinese Steel

On Friday, the US Commerce Department announced its plans to raise import tariffs for the Chinese stainless steel products from 63 percent to 190 percent citing a probe that found they were selling on US market at dumping-level price.

“China is disappointed that the United States continued to launch high taxes on Chinese steel export products and calls into question the unfair way the US conducted its investigation,” Wang said, as quoted by the South China Morning Post newspaper.

The United States did not take into the account the evidence previously submitted by the Chinese steel manufacturers and avoided cooperation with the Chinese government, violating the rules of the World Trade Organisation (WTO), the Chinese official underlined.

This is a second blow for the Chinese steel importers in the recent months. The European Commission imposed in January anti-dumping duties on Chinese stainless steel tubes and pipe butt-welding fittings to protect its industry from steel overcapacity.

According the European Commission, Chinese imports will be taxed with duties ranging from 30.7 to 64.9 as its investigation commission confirmed that Chinese stainless steel products had been sold in Europe at dumping prices.

US court refuses to immediately restore Trump travel ban

A U.S. appeal court late on Saturday denied a request from the U.S. Department of Justice to immediately restore a immigration order from President Donald Trump barring citizens from seven mainly Muslim countries and temporarily banning refugees.

The court ruling dealt a further setback to Trump, who has denounced the judge in the state of Washington who blocked his executive order on Friday. In tweets and comments to reporters, the president has insisted he will get the ban reinstated.

 Trump says the temporary immigration restrictions on citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen, and on all refugees, are necessary to protect the United States from Islamist militants. Critics say they are unjustified and discriminatory.

The judge’s order and the appeal ruling have created what may be a short-lived opportunity for travelers from the seven affected countries to get into the United States while the legal uncertainty continues.

In a brief order, the appeals court said the government’s request for an immediate administrative stay on the Washington judge’s decision had been denied. It was awaiting further submissions from Washington and Minnesota states on Sunday, and from the government on Monday.

The government’s appeal says the decision by judge James Robart in Washington poses an immediate harm to the public, thwarts enforcement of an executive order and “second-guesses the president’s national security judgment about the quantum of risk posed by the admission of certain classes of (non-citizens) and the best means of minimizing that risk”.

Trump denounced the “so-called” judge in a series of tweets on Saturday and told reporters: “We’ll win. For the safety of the country, we’ll win.”

IRAQI FAMILY

The president’s Jan. 27 order has drawn criticism even from U.S. allies and created chaos for thousands of people who have, in some cases, spent years seeking asylum in the United States.

Iraqi Fuad Sharef, together with his wife and three children, spent two years obtaining U.S. visas, and had packed up to move to America last week, but were turned back to Iraq after a failed attempt to board a U.S.-bound flight from Cairo.

US Plans To Impose Additional Iran Sanctions As Early As Friday; Would Not Violate Nuclear Deal

According to Reuters, the United States is expected to impose sanctions on multiple Iranian entities as early as Friday following Tehran’s recent ballistic missile test, but in a way that will not violate the 2015 Iran nuclear deal, sources familiar with the matter said on Thursday.

One source, who spoke on condition of anonymity, said about eight Iranian entities were to be sanctioned, or “designated” in U.S. legal jargon, for terrorism-related activities and about 17 for ballistic missile-related activities under separate existing U.S. executive orders. The source declined to name the entities.

While we await more details, the fact that the Trump administration is in no hurry to scrap Obama’s Nuclear Deal is likely a suggestion that this particular draconian step will not be taken in the near future, if at all, and thus a potential major risk factor for higher oil prices can be eliminated for the time being.

Iran Admits It Test Fired New Missile, Putting Nuclear Deal In Jeopardy

After yesterday US officials reported that Iran conducted a nuclear ballistic missile test on Sunday, which some claimed would be another violation of the UN resolution and Obama’s nuclear deal, on Wednesday Iran’s defense minister admitted that the Islamic Republic had indeed tested a new missile, but added the test did not breach Tehran’s nuclear accord with world powers or a U.N. Security Council resolution endorsing the pact.

Iran has test-fired several ballistic missiles since the nuclear deal in 2015, but this is the first during U.S. President Donald Trump’s administration. Trump said in his election campaign that he would stop Iran’s missile program. Furthermore, the confirmed launch comes at a precarious time, with president Trump seemingly looking for excuses to scrap the Iran deal, which could potentially lead to the reestablishment of Iran sanctions and the halt of Iranian oil exports to global markets, taking away as much as 1 million barrels of daily supply.

China official January Manufacturing PMI: 51.3 (expected 51.2, prior 51.4)

Data from China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics

Comes in at 51.3
  • expected 51.2 and previous was 51.4
An early release for this data point
China is on holidays (for the Lunar New Year, markets reopen Friday February 3 there)
We’ll get the private-survey (Caixin) manufacturing PMI on Friday

EU’s Donald Tusk takes a swipe at Trump

Brussels has hit back at US President Donald Trump over his repeated criticism of the EU, saying “worrying declarations” since he took power have put Europe in a difficult situation as it confronts mounting turmoil around the world.

Donald Tusk, president of the council of EU leaders, placed the new administration in Washington alongside China’s assertiveness and Russia’s aggression among the global forces making Europe’s future “highly” unpredictable. “We should remind our American friends of their own motto: United we stand, divided we fall,” he said.

The intervention by Mr Tusk, former prime minister of Poland, marks the most forthright response from Brussels since Mr Trump ridiculed the EU as a “vehicle for Germany” after taking office and predicted other countries would follow Britain in leaving the bloc.

Mr Tusk said the EU faces challenges more dangerous than at any other time in the history of European integration, specifically citing the Mr Trump’s administration among the external threats to Europe from the tense geopolitical situation in the world.