dinsdag 19 september 2017

Bank Stocks, Bullion And Bond Yields Jump Ahead Of Fed As Small-Cap VIX Hits Record Low

Up...

While Small Caps and Trannies ended red, the other major indices held on to gains (record highs for Dow, S&P), though Mexico City's quake took some shine off in ther afternoon...


Futures show selling pressure as Japan opened, Europe opened and as US opened...


Interestingly, "Most Shorted" stocks have been fading since shortly after yesterday's open...



Retailers tanked today (orange) as banks (green) were panic bid once again into The Fed decision tomorrow...


Financials tagged recent high stops after smashing through the 50DMA finally...


FANG Stocks slid after the opening ramp but dip-buyers were there once again...


Mewanwhile, Russell 2000 VIX collapsed to a new all-time record low...


And then there's this utter fucking farce...


Around 1pm local time, Mexico City was hit by a 7.2 quake which sent the peso and mexican stocks lower...


Markets are implying zero chance of a rate hike tomorrow but December's odds surged from high teens to over 53% in the last few days...


Treasury yields ended modestly higher ahead of The Fed tomorrow. With 10Y Yield hovering right at the same level as when FOMC Minutes hit...


The Dollar Index leaked lower in a narrow range today...


Gold and silver rose on the day (especially after Mexico) as WTI slipped in the afternoon ahead of API data...


Gold has inched back ahead of the S&P year-to-date...


And finally, 2017's "Big Short" is paying off...

WTI/RBOB Jump After Smaller Than Expected Crude Build

After last week's record-breaking draw in Gasoline stocks, and big crude build, the noise from Harvey and Irma disruptions continues to add volatility to the data. API reported a smaller than expected crude build and bigger than expected gasoline (and distillates) draw sent prices for both WTI and RBOB higher. API;
- Crude +1.43mm (+3.9mm exp)
- Cushing +420k (+900k exp)
- Gasoline -5.063mm (-2.13mm exp)
- Distillates-6.13mm
A smaller than expected crude build and considerably bigger than expected draws in gasoline and distillates...


WTI and RBOB prices slipped lower on the day heading into the API print with Crude glued at $50.
The kneejerk reaction was a spike in both WTI/RBOB...

Ahead Of Tomorrow's Historic Fed Meeting, Here Is The Only "Cheat Sheet" You Need

Ahead of tomorrow's historic Fed announcement, in which for the first time the Fed is expected to announce the phasing out of bond reinvestment and the shrinking of its balance sheet by roughly $10 billion per month starting in October and November, but fear not the BOJ and ECB will more than offset this decline...


There are various other unknowns with which Yellen could still surprise the market, including the Fed's signalling on policy rates, economic projections, a shift in the "dots", comments on asset prices and, last but not least, whether Yellen will stay or leave when her term expires in Feb 2018. Below, courtesy of ING, is the definitive "cheat sheat" matrix laying out all possible permutations of what can happen tomorrow, as well as the most likely market reaction...


Incidentally, ING believes that whatever Yellen says will be negative for the dollar, and expects the USD's cyclical decline to continue after Wednesday. It gives five reasons for its dollar bearishness:
- Fed’s dot plot likely to go through a downgrade
- The storms might wreck Fed’s balance sheet plans
- Rate increases won’t necessarily tighten financial conditions
- Yellen’s future still hangs in the balance
- Hawkish Fed cries set to fall on deaf ears (again!)....

At Least 53 Dead, 27 Buildings Collapsed After Powerful Quake Rocks Mexico City

Update 4 (5:14): President Nieto has confirmed that the death toll has risen to 53. EPN has declared a national state of emergency to deal with the aftermath of the quake. Education Minister Aurelio Nuño tweeted "all public and private schools in Mexico City are cancelled until further notice." He said schools in the states of Puebla and Guerrero also are closed until further notice...


Update 3 (5 pm ET): Mexican President Enrique Pena Nieto will give a statement about today's quake later tonight. In the meantime, he has urged people to stay off the streets. The water system in Puebla, the state where today's earthquake was centered, has been damaged, according to media reports... More footage and images of the quake are beginning to emerge, including this shot, taken by a drone camera, of a building collapsing in Mexico City. In a series of tweets, EPN warned residents returning to their homes to turn off the gas and close the door. He also noted that patients from damaged hospitals were being evacuated, and that Mexico's IMSS and ISSSTE emergency services are open to the entire population.
# ABC News ✔ @ABC Drone footage shows destruction in Mexico City caused by the 7.1-magnitude earthquake; at least 42 people killed. http://abcn.ws/2
Update 2 (4:38 pm ET): The governor of the Mexican state of Morelos said at least 42 people have died in the central Mexican state, which shares a border with Puebla, the state that contains Mexico City. Counting the five confirmed deaths in the state of Puebla, the quake's body count has risen to 47. Meanwhile, the Mexican government has asked to restrict phone and internet use to emergency situations only as the Mexican military has arrived in the Roma and Condesa areas of the capital city. 
*MEXICAN MILITARY ARRIVE IN ROMA, CONDESA AREA OF CAPITAL
*MEXICO GOV ASKS TO RESTRICT PHONE, INTERNET FOR EMERGENCIES
Mexico City's governor says 27 buildings have collapsed...


*MEX. PRES SAYS 27 BUILDINGS IN MEX CITY HAVE COLLAPSED:TELEVISA
Update (4:05 pm ET): The BBC is reporting that several deaths have already been reported as a result of the quake. Reuters says at least five have been killed. The AP quoted Mexico City's mayor as saying that there are reports of peole still trapped in collapsed buildings. President Donald Trump has taken time out of his day of meetings at the UN to tweet his support: "God bless Mexico City. We are with you and we will be there for you." Meanwhile, there are reports that tremors were felt as far away as Guadalajara, more than 300 miles away...


# On the anniversary of a massive 1985 earthquake that killed at least 5,000 people, Mexico City has been shaken by another powerful earthquake, the second the shake the city in the past two weeks. The 7.1 magnitude quake shook buildings in the capital city, sending thousands rushing into the streets, according to Reuters. The earthquake damaged hundreds of buildings in the city, according to initial reports. Ironically, the quake hit only hours after many people participated in earthquake drills around the nation - drills specifically timed to mark the anniversary of the 1985 earthquake... The epicenter of the quake was 5 miles (8 km) southeast of Atencingo in the central state of Puebla at a depth of 32 miles (51 km), Reuters reported, citing the US Geological Survey. A powerful 8.1 quake hit Mexico earlier this month, killing at least 98 people. Accordin to the Associated Press, much of Mexico City is built on former lakebed, and the soft soil can amplify earthquakes even hundreds of miles away...


# The breaking news headlines are still rolling in...
*MEXICO CITY QUAKE DAMAGED HUNDREDS OF BUILDINGS
*MEXICO CITY AIRPORT SUSPENDS OPS UNTIL INFRA REVIEW IS DONE
*MEXICO CITY AIRPORT SAYS IT'S INSPECTING RUNWAYS AFTER QUAKE
*MEXICO CITY AIRPORT SAYS IT'S INSPECTING TERMINALS FOR DAMAGE
*MEXICAN BOLSA CEO: STILL DECIDING WHETHER TO RESUME OPS TODAY
*MEXICO CITY QUAKE DAMAGES DOZENS BUILDINGS IN FIN. DISTRICT
*MEXICO CITY AIRPORT SAYS IT'S INSPECTING RUNWAYS AFTER QUAKE
*MEXICO CITY POLICE CLOSE OFF STREETS IN ZONA ROSA AREA
*NO QUAKE DAMAGES REPORTED AT THE MOMENT:MEXICO CIVIL PROTECTION
*7.1 MAG. EARTHQUAKE PUEBLA MEXICO :EMSC
*7.1 MAG. EARTHQUAKE CENTRAL MEXICO :GFZ
*MEXICO CITY QUAKE CAUSES POWER OUTAGE IN FINANCIAL DISTRICT
*MEXICO CITY BUILDINGS SHAKE IN EARTHQUAKE
*MEXICO BUILDINGS ROCK IN APPARENT QUAKE
*SMOKE SEEN COMING UP FROM SOME BUILDINGS IN MEXICO CITY
*MEXICO STOCKS FALL NEAR SESSIONS LOWS AFTER QUAKE
*SOME BUILDINGS IN ROMA NEIGHBORHOOD IN MEXICO CITY COLLAPSED
#  Here's a map showing where the quake occurred...


Mexican stocks fell to the lows of the day after the quake, while the dollar surged against the peso...

Tech Stocks Are Tanking, Banks Panic-Bid

After an exuberant overnight session, ignoring the slump in USDJPY and bond yields, the US cash session open appears to have triggered a wave of selling (especially in tech stocks). Nasdaq is getting whacked at the open...


Bank stocks are bid once again, back to pre-FOMC Minutes levels, as Tech rolls over...


The S&P is back to unchanged...


As VIX spikes back above 10...


And as a reminder, yesterday's open was the opposite, a panic-bid...

US Export, Import Prices Spike Most In 14 Months

US Import and Export prices jumped more than expected in August, both rising 0.6% MoM, the biggest rise since June 2016...


A 4.8% MoM spike in Petroleum drove the import surge and the rise in Industrial Supplies' costs sent Export prices higher. Year-over-year, both import and export prices are rising faster than The Fed's 2% mandate...

Boris Johnson Threatens To Resign If Theresa May "Goes Against His Brexit Demands", Pound Rises

In confirmation that Theresa May's upcoming Florence speech this Friday is not only what many have called "the most important day for Brexit since the referendum", but also the most opaque, the Telegraph reports that UK Foreign Secretary Boris Johnson will resign as before the weekend if Theresa May veers towards a “Swiss-style” arrangement with the EU in her upcoming speech. The Foreign Secretary believes he will have no option but to walk out of the Cabinet if the Prime Minister advocates permanently paying for access to the single market. Stopped by reporters in New York today after going for a run, Mr Johnson said he was not going to resign and described the Cabinet as "a nest of singing birds". However, he has reportedly "told friends that a so-called “EEA minus” version of Brexit is something he “could not live with”. If she tells the Cabinet she has made up her mind in favour of the Swiss-style “EEA minus” option, which would yoke Britain to the EU through payments for single market access and adherence to most EU rules and regulations, Mr Johnson could not support it and would have to resign under the convention of collective Cabinet responsibility. An "EEA minus" scenario (like Switzerland and Norway) is one of several visions for Brexit emerging within the government.
One recent sellside observation defines it as follows: In blunt terms, the Swiss model is outside the EU, but with access to the single market (whilst not being inside it). Britain would shadow the EU’s regulatory structures and transpose European Court of Justice Judgements. They want to negotiate a similar deal for the UK but “minus” the freedom of movement. Curcially though, Switzerland had to concede and give the EU certain Freedom of Movement – the UK wants to get this deal “minus” freedom of movement (hence the name). This proposal supposedly has the backing of Chancellor Hammond, Home Secretary Amber Rudd, Cabinet Secretary Jeremy Heywood and Olly Robbins (who was, until last night, civil service head of the Department for Exiting the European Union). The "Swiss-style" arrangement is in contrast to a "CETA Plus”, or omprehensive Economic and Trade Agreement, a la Canada, which negotiated a free-trade agreement with the EU which effectively eliminates 98% of tariffs between the two countries, which the EU Commission has said will save the EU over half a billion EUR in taxes each year, and allows “mutual recognition in regulated professions such as architects, accountants and engineers, and easier transfers of company staff and other professionals between the EU and Canada”. Following the report GBPUSD has jumped about 30 ticks, rising above 1.353, suggesting the the market's vote is, in fact, for EEA minus... and also a "Boris Johnson minus" outcome....

Things To Ponder

- Markets Brace for Fed’s Big Move: The End of Easy Money (WSJ)
- Senate GOP Has 12 Days to Repeal Obamacare and No Room for Error (BBG)
- Senate GOP Considers a Trillion-Dollar-Plus Tax Cut for Budget (WSJ)
- In first speech at U.N., Trump to single out North Korea, Iran (Reuters)

Hurricane Maria Causes "Widespread Devastation" In Dominica As It Races Toward Puerto Rico

In less than two days, Hurricane Maria has strengthened from a tropical storm to a powerful category five hurricane, dubbed in no uncertain terms as "catastrophic" by the NHC. Though it has been downgraded to a category 4 overnight, the storm made landfall on the tiny Caribbean island of Dominica, leaving it utterly “devastated,” according to the island’s prime minister...


"We're just waiting for daybreak to do an assessment of the damage," Dominica Prime Minister Roosevelt Skerrit told CNN's Rosemary Church. The storm, which made landfall Monday night, has maximum sustained winds of 155 mph, and remains on track to directly hit Puerto Rico, what would make it the first category four hurricane to directly hit the island in 85 years, according to CNN. Skerrit said the island’s “first order of business” following the storm would be to make sure “every single citizen and resident is safe”...


A statement from the National Hurricane Center said Maria’s winds reached 160 miles per hour when it hit the island nation. In an update, the Center said that reports "indicate significant damage to structures has occurred in Dominica." A hurricane warning remains in effect for Guadeloupe, Dominica, St. Kitts, Nevis, and Montserrat, the US and British Virgin Islands as well as Puerto Rico, Culebra, and Vieques. According to CNN, the ferocity of Maria bears striking similarities to Hurricane Andrew, a Category 5 hurricane that hit the Bahamas and Florida in 1992. Both storms are compact, and Maria's wind speed comes close to that of Hurricane Andrew, 165 mph, when it hit southern Florida...

Euro Tumbles On Report ECB Is "Concerned And Divided" Over End To QE

Talk 'em up, then slam 'em down. The familiar pattern of "clear and transparent" central bank communication was on full display moments ago, when following months of build up to an ECB taper announcement, the ECB used its favorite mouthpiece, Reuters, to "trial balloon" that an ECB decision over whether to announce a firm end-date to the central bank's bond buying could be "put off until December" as a result of disagreement among the ECB council stemming from "concern over Euro strength" which is leading to "uncertainty and divide within the council." As a result, some within the ECB want to be able to "extend or expand" buys if needed, in other words if the EURUSD rises too far above 1.20. The highlights from Reuters:
*CONCERN OVER EURO STRENGTH IS LEADING TO UNCERTAINTY AND DIVIDE WITHIN ECB COUNCIL - SOURCES
*ECB POLICYMAKERS DISAGREE ON WHETHER TO SET FIRM END-DATE FOR BOND-BUYING PROGRAMME IN OCT - SOURCES
*SOME ECB RATE SETTERS WANT TO BE ABLE TO EXTEND OR EXPAND BUYS IF NEEDED - SOURCES
*SOME ELEMENTS OF ECB DECISION COULD BE PUT OFF UNTIL DEC - SOURCES
# And the full report. European Central Bank policymakers disagree on whether to set a definitive end-date for their money-printing programme when they meet in October, raising the chance that they will keep open at least the option of prolonging it again, six sources told Reuters. A stubbornly strong euro, with its dampening effect on inflation, is driving a rift among ECB policymakers, the sources on the ECB’s Governing Council with direct knowledge of its thinking said. The split is between ‘hawks’, led by richer, northern countries such as Germany, who are ready to wind down the 2.3 trillion euros bond-purchase programme and ‘doves’ who simply want to reduce its monthly pace, the sources said.
This is raising the likelihood that they will seek a compromise solution on Oct. 26, whereby any end-date for purchases would not be set in stone, or that they will put off part of the decision until December, the sources added. The main point of contention is the euro’s continued appreciation against major currencies, which is threatening to curb inflation in the euro zone by making its imports cheaper and exports dearer In immediate kneejerk reaction, the EURUSD tumbled from 1.1990 to as low as 1.1960 as traders scratch their heads just how will the ECB extend QE indefinitely when it is running out of bonds to buy, and wondering if the ECB will pull a BOJ and buy ETFs next as Reuters also "trial ballooned" back in 2016...

Toys "R" Us Files Chapter 11: Second Largest US Retail Bankruptcy In History

Toys “R” Us Inc, the largest US "brick and mortar" toys retailer, filed for bankruptcy late on Monday night, as a result of a crushing post-LBO debt load and relentless competition from warehouse and online retailers, the "latest blow to a retail industry reeling from store closures, sluggish mall traffic and the gravitational pull of Amazon.com" according to Bloomberg. The Chapter 11 filing is among the largest ever by a specialty retailer and casts doubt over the future of its about 1,600 stores and 64,000 employees. It comes just as Toys ‘R’ Us is gearing up for the holiday shopping season, which accounts for the bulk of its sales, and as vendors halt shipments to the now insolvent retailer. With assets of $6.9 billion, it’s the second-largest retail bankruptcy, trailing the filing in 2002 by Kmart, which had $14.6 billion in assets. The company was saddled with debt from a $6.6 billion buyout in 2005 led by KKR, Bain Capital and Vornado Realty Trust. Toys ‘R’ Us has bonds coming due over the next few years that lost most of their value this month...


“While today’s decision does not necessarily mean it is game over for Toys ‘R’ Us, it brings to a close a turbulent chapter in the iconic company’s history,” said Neil Saunders, managing director of GlobalData Retail. “What they have going for them is they are the last major player in their market,” said David Berliner, a partner and restructuring specialist with BDO Consulting. “The vendors don’t want to see them fail, so I think they have a good opportunity to survive.” The company listed debt and assets of more than $1 billion in its Chapter 11 filing submitted Monday at the U.S. Bankruptcy Court in Richmond, Virginia. Prior to filing, the company said that it had secured more than $3 billion in financing from lenders including a JPMorgan Chase & Co.-led bank syndicate and certain existing lenders to fund operations while it restructures. The money will be critical to provide comfort to Toys "R" Us vendors that they will be paid on time. Yesterday the stocks of some key suppliers such as Hasbro and Mattel were hit in advance of the filing.
When reports surfaced recently that Toys “R” Us was weighing a bankruptcy filing, Chinese toy scooter maker Pinghu Mijia Child Product Co. put all of the retailer’s orders on hold, fearing it wouldn’t get paid, according to sales manager Justin Yu, Bloomberg reported. The toy retailer represents about 10 to 20 percent of the Chinese supplier’s sales. “We were shocked to hear the news last week because their orders to us have been rising every year, so we did not know they were in trouble,” Yu said. “They’re a major buyer and I would say that the majority of toy makers in China would have some contracts with them.” The bankruptcy filing by the company also may have global implications, especially for Chinese toy manufacturers. Some 38 percent of the company’s revenue came from overseas markets in the latest fiscal year. “It’s a loss for the long-term benefit of the entire industry,” said Lun Leung, chairman of  Lung Cheong Group, a toy supplier for Hasbro. He said Toys “R” Us accounted for less than 5 percent of the group’s sales. “We expect that the financial constraints that have held us back will be addressed in a lasting and effective way,” Chief Executive Dave Brandon said. “Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long-term debt on our balance sheet.” 
The company's Canadian unit intends to seek protection in parallel proceedings under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice, Toys ‘R’ Us said in a statement. Operations outside of the United States and Canada, including about 255 licensed stores and joint venture partnerships in Asia, which are separate entities, are not part of the bankruptcy proceedings, Toys ‘R’ Us said. As an indication of the challenges faced by the struggling retailer, the company opened a temporary store in New York City’s Times Square this year to capture more holiday shoppers, almost two years after it closed its flagship store barely a block away, driven out by high rents. More than a dozen significant retail chains have filed for bankruptcy this year. Among them were Perfumania Inc, apparel chains rue21 Inc and Gymboree Corp, discount shoe chain Payless Holdings LLC and designer clothing chain BCBG Max Azria Global Holdings LLC...


The shakeout is also reverberating across American malls and shopping districts. More than 10 percent of U.S. retail space, or nearly 1 billion square feet, may need to be closed, converted to other uses or renegotiated for lower rent in coming years, according to data provided to Bloomberg by CoStar Group. Major retailers including Macy’s and Sears Holding have closed hundreds of locations as they struggle to compete discounters such as Wal-Mart and Amazon.com. Amazon’s recent acquisition of high-end grocer Whole Foods Markets Inc stirred speculation that the online giant will use its pricing power and huge reach among U.S. consumers to go after market share of traditional brick-and-mortar grocers....

Global Equities Hit New All Time High Ahead Of The Fed; VIX Below 10; Japan Stocks Surge

S&P futures are little changed as the Fed begins its two-day FOMC meeting pushing the VIX below 10, down 1.3% and falling for the 7th day; European shares are lower as is the dollar while Japanese stocks soar on the back of a tumbling yen as a snap election in Japan now appears imminent. Despite the cautious action ahead of the Fed, the The MSCI All-Country World Index rose 0.1% to a new record high. Among the notable overnight moves, the USDCNH climbed to highest since late August ahead of this week’s FOMC decision. Ten-year Treasury yields fell 1 bp; Australia’s 10-year gained 1 bp. Japanese equities rose 1.5% ahead of an expected snap election to be called by PM Abe this week; China and Hong Kong shares declined. WTI crude holds just below $50; Dalian iron ore contract dropped. The Bloomberg Dollar Spot Index was little changed before tomorrow’s Fed’s policy decision, when interest-rate projections are seen drawing more attention than any balance-sheet announcement as tapering is seen as a given. The euro was supported by unwinding of shorts against the pound and by yen selling amid improved risk appetite and reports of Japan PM Abe calling for snap elections.
Treasuries were underpinned in Asian hours as Japanese investors returned after Monday’s holiday, while price action was muted in London trading. Meanwhile, nobody appeared concerned about tomorrow's Fed announcement, where the balance sheet unwind is expected while attention will focus on any revision to the Fed's dots. “We are not overly concerned about” the Fed’s quantitative-tightening plans, Merrill Lynch and U.S. Trust head of fixed-income strategy Matthew Diczok told Bloomberg TV. “If you model it out, over about the next three years they’ll take out about $1.3 trillion or so. That’s only a third of what they put into the market. So it’s going to be very slow, very gradual, very deliberate and it shouldn’t lead to any near-term fireworks into the market at all.” Following the recent improvement in data, December rate hike odds once again rose back to 50%, suggesting another rate hike may be possible this year...


JP Morgan Asset Management portfolio manager Iain Stealey said markets were now fully set for the Fed to officially announce it will cut, or taper, the amount it re-invests from the profits of its $4.2 trillion crisis-era bond portfolio. “They have already announced the amounts they are going to start with, $10 billion on a monthly basis and probably starting over the next month or so,” Stealey said. “What may be more important to keep an eye on is the dot-plot. We still think they will have the dots set up to expect one more hike this year, which will obviously be in December, and three next year.” With little in terms of overnight newsflow, the highlight was Japanese shares which surged to their highest level in more than two years as the yen weakened for a third day, bolstering appetite for electronics makers, autos and banks.
Japanese equities gained on expectations Prime Minister Shinzo Abe will call a snap election. As reported on Sunday, Prime Minister Abe is considering calling a poll for as early as next month to take advantage of his improved approval ratings in the wake of the North Korea crisis, and disarray in the main opposition party, according to sources. The benchmark Topix index extended gains after capping its best week since April on Friday, as investor focus shifted to economic fundamentals from concerns over North Korea. The yen dropped to an almost two-month low against the dollar Tuesday. Abe said Monday he’ll decide on calling a snap election after he returns from a trip to the U.S., confirming our previous report that he’s considering calling a vote a vote more than a year early, prompting speculation for more fiscal stimulus while keeping the BOJ on hold. “The weaker yen is providing tail wind to export-related stocks” after the market shrugged off the North Korea’s missile launch last week, Hiroaki Hiwada, a strategist at Toyo Securities told Bloomberg. “The equity market is taking the news about a possible snap election positively as it boosts expectations Abe’s coalition parties will retain power.”
As a result, "Japanese shares generally gain around calls to hold new elections", Nomura Securities wrote in a report. Stefan Worrall, director of Japan equity sales at Credit Suisse in Tokyo said there has been concern growing for a while among foreign investors about the future of Abe’s stimulus-focused Abenomics program. “If Abe is cemented in power for another few years, that would be a market-positive event,” he said. “Certainty is preferred to uncertainty, when it comes to market confidence.” The Nikkei’s 2 percent jump overnight took its gain to almost 30 percent since Abe took power in late 2012. Another notable overnight move was the sudden drop in the yuan, where the CNH tumbled to a two-and-a-half week low as a state-run firm was said to be buying dollars to make dividend payments. The onshore yuan dropped as much as 0.34% to 6.5987 per dollar and was down 0.12% at 6.5838 as of this morning. In addition to the currency move, the PBOC pumps in net 150b yuan ($23b) via reverse- repurchase agreements, after adding 300b yuan Monday. Elsewhere in Asia the mood had been more subdued. South Korean shares dipped 0.1 percent, against a backdrop of caution ahead of the Fed meeting as well as continuing tensions on the Korean peninsula.
The MSCI Emerging Market Index decreased 0.3 percent, the largest dip in more than two weeks. Asian stock traded cautiously ahead of the FOMC and as the region failed to maintain the early impetus from US where financials led the S&P 500 and DJIA to fresh record closes. Australia's ASX 200 (-0.1%) and Nikkei 225 (+2.0%) were positive in which the latter surged as it played catch up to the gains on return from holiday, while weakness in defensive stocks restricted upside in Australia. Shanghai Comp. (-0.2%) and Hang Seng (-0.4%) were dampened despite another firm PBoC liquidity operation, with the underperformance in China the rest of the region attributed to profit taking. The PBOC injected net 150b yuan in open-market operations on Tuesday, bringing the additions since last Thursday to 750b yuan. 10yr JGBs lacked demand amid the positive risk tone in Japan and although the BoJ were present in the bond market, this was for a relatively reserved JPY 535bln total.
In Europe, the Stoxx Europe 600 Index was fractionally in the red, amid mixed regional benchmarks. Gauges from Hong Kong to South Korea had retreated earlier, even as Japan soared following a holiday on Monday. Germany’s DAX Index decreased 0.1 percent while the U.K.’s FTSE 100 Index rose 0.2%. The pound reversed an advance as investors weighed the latest political disarray over Brexit strategy, and the euro headed for a fourth daily advance. Elevated risk appetite in Europe meanwhile saw the gap between Portuguese and Italian 10-year government bond yields narrow to levels not seen since the start of the euro zone debt crisis of 2010-2012. That followed a strong rally in Portuguese debt over the last two sessions, after S&P became the first major ratings agency to give the country back an investment grade rating, more than five years after it first sank into junk territory. In currencies, Britain's sterling also started to retreat again having been pushed off post Brexit highs on Monday by Bank of England governor Mark Carney who said any upcoming UK rate hikes would be gradual and limited. The Bloomberg Dollar Spot Index fell less than 0.05 percent. The euro increased 0.2 percent to $1.1978, the strongest in more than a week. The British pound decreased 0.1 percent to $1.3477.
In commodity markets, metals shifted lower and oil prices steadied near last week’s multi-month highs. Traders braced for a potential stockpile build-up expected later this week, limiting the prospect for further gains. U.S. crude futures were up 19 cents at just above $50 per barrel, within sight of Thursday’s nearly four-month high of $50.50. Brent crude hovered at $55.50, not far from an almost five-month high of $55.99 it had marked that day. In rates, the yield on 10-year Treasuries fell one basis point to 2.22 percent, the largest fall in more than a week. Germany’s 10-year yield declined one basis point to 0.45 percent, the biggest fall in more than a week. Britain’s 10-year yield declined two basis points to 1.281 percent, the largest fall in more than a week. On the news front, President Trump is scheduled to address the United Nations on Tuesday for the first time as world leaders continue to seek a diplomatic solution to North Korea’s nuclear provocations. Data include August housing starts and 2Q current account. Adobe, AutoZone, Copart, FedEx are among companies reporting earnings. The Iraq Oil Minister said he does not think now that there is a need for more output reductions, but if there was a need for more cuts in the future, Iraq will support consensus within OPEC, Adding, that there are proposals for more cuts, but he does not think it will be implemented, but will be studied.
# Market Snapshot;
- S&P 500 futures little changed at 2,503.20
- VIX Index down 1.3%, falling for the 7th day
- STOXX Europe 600 down 0.1% to 381.66
- Nikkei up 2% to 20,299.38
- Topix up 1.8% to 1,667.88
- Hang Seng Index down 0.4% to 28,051.41
- Shanghai Composite down 0.2% to 3,356.84
- Euro up 0.3% to $1.1984
- Brent futures up 0.3% to $55.67/bbl
- Gold spot little changed at $1,308.52
- U.S. Dollar Index down 0.2% to 91.87
# Top Overnight News;
- EU wants the Paris-based regulator European Securities and Markets Authority to get a bigger role in reviewing fund managers’ activities, Financial Times reports, citing plans seen
- Japanese Prime Minister said he is considering dissolving parliament to hold a snap general election, ruling Liberal Democratic Party Secretary General Toshihiro Nikai told reporters in Tokyo; Abe to express his intention to dissolve the Lower House at a press conference on Sept. 25, FNN reports, without attribution
- French President Macron is planning to provide details on his proposals for euro-zone reforms in a speech on the future of EU on Sept. 26, FT reports, citing unidentified aides; proposal includes a separate budget, a finance ministry and a European Monetary Fund
- Norway’s sovereign wealth fund hit $1 trillion for the first time on Tuesday, driven higher by climbing stock markets and a weaker U.S. dollar
- Germany ZEW Sept. survey expectations 17 vs est. +12 - Toys ‘R’ Us Seeks Bankruptcy, Crushed by Debt and Online Rivals
- BNP Among Firms Said to Be Eyeing Axa Asset- Management Tie-Up
- Mexico’s Femsa Sells $3 Billion Stake in Brewer Heineken
- Park Hotels Is Said to Seek Over $500 Million for 15 Properties
- Bayer Sees Monsanto Transaction Closing Delayed to Early 2018
- Wall Street’s Bond Gurus Have It All Wrong as QE Unwind Looms
- Trump at UN to Urge Action on North Korea, Iran Threat; U.S. to Act on North Korea Rockets That Pose Threat, Mattis Says
- Maria Weakens as Storm Passes Dominica on Way to Puerto Rico
- Brexit Rift Widens as Johnson Talks of Life After Government
*) Asia equity markets traded with a cautious tone as the FOMC draws closer and after the region failed to maintain the early impetus from US where financials led the S&P 500 and DJIA to fresh record closes. ASX 200 (-0.1%) and Nikkei 225 (+2.0%) were initially positive in which the latter surged as it played catch up to the gains on return from holiday, while weakness in defensive stocks restricted upside in Australia. Shanghai Comp. (-0.2%) and Hang Seng (-0.4%) were dampened despite another firm PBoC liquidity operation, with the underperformance in China the rest of the region attributed to profit taking. 10yr JGBs lacked demand amid the positive risk tone in Japan and although the BoJ were present in the bond market, this was for a relatively reserved JPY 535bln total. PBoC injected CNY 130bln via 7-day reverse repos and CNY 20bln via 28-day reverse repos. PBoC set CNY mid-point at 6.5530 (Prev. 6.5419). Japanese PM Abe is told hold a press conference on Monday 25th September; comes in the context of recent speculation that he could call a snap election.
# Top Asian News;
- Hong Kong Dollar Surges With Hibor Rates as HKMA Mops Up Cash
- Goldman Sachs Names Hitchner Chairman, CEO Asia-Pacific Ex- Japan
- Markets Are Betting That Japan’s Abe Would Win a Snap Election
- Alibaba Is Said to Buy $100 Million in Best Inc.’s Downsized IPO
- Tata Is Said to Be Boosting Carmaker Stake for $312 Million
*) European equity markets trade in subdued fashion, as much anticipation remains on the FOMC tomorrow. EU bourses are mixed for the session, failing to gather any bullish impetus from another record close on Wall Street, not helped by a morning bullish grind in the Euro. Equity specific stories have also dragged down markets, noticeably, Heineken is a leading faller, down close to 4%, after bottler and retailer Femsa has sold a 5.24% stake in the firm. Kantar and Nielsen released their 12-week supermarket sales, helped lead to Sainsbury’s and Morrisons to be two of the out-performers in the FTSE. The grocer optimism has not spread however, with despite what appeared to be strong results for Ocado, the concerns of rising costs have seen the Co. down over 4%. Bond markets have traded in a consolidated range through the European morning. Spreads have seen some marginal volatility, the 10y Spain/Germany has been tightening on the back of Portuguese bonds. PGBs continue to stand out, being down as much as 2-4.0bps along the curve, with the 10y trading through -2.40%. Supply has come from the DMO this morning who came to market with a 30yr auction which drew a smaller b/c than previous (albeit still healthy at 1.97) and a wider tail than previous but did little to cause traction in longer duration paper.
# Top European News;
- Merkel Eyes BMW Homeland for Final Election Boost After Spat
- Carney Says U.K. Rate Increase Looms in Brexit-Hobbled Economy
# In currencies, the pound has seen some marginal selling this morning, as cable looks to attempt a break through yesterday’s low. Position unwinding in cable is evident as the Fed is due tomorrow, with buyers potentially not convinced by Carney’s 'gradual and limited’ comments. Elsewhere, an upbeat ZEW report from Germany failed to inspire any noteworthy price action in the EUR. USD/JPY caught a bid heading into European trade after breaking above the prior session’s highs before dissipating throughout the EU session. AUD was largely unreactive to an unsurprising minutes release where the RBA stuck to its usual rhetoric.
# In commodities, oil markets have been relatively unfazed by the speech from the Iraq Oil Minister who said there are proposals for more OPEC cuts, yet with no clear clarity the OPEC extension comments seem disconcerting to markets. WTI crude futures has seemed to consolidate above 49.50, above 50/bbl and looking to break through 50.50, where stops are likely to be triggered. Price action in metals has been subdued overnight with copper also relatively subdued.
# Looking at the day ahead, there are housing starts, building permits, current account balance and the import / export price index. President Trump is scheduled to address the United Nations on Tuesday for the first time as world leaders continue to seek a diplomatic solution to North Korea’s nuclear provocations....

AEX Index Update (13-9-2017)


# De koers bevindt zich nu in de 529-zone en lijkt op weg ri. gap 532 zolang het boven vml gap 527-528 blijft, welke dus nu S moet vormen in een Pullback....

Tuesday Market Observations

# The SPX opened strong yesterday, but may have started a pullback from here (pivot support at SPX 2479) into the FOMC minutes on Wednesday. This could set up another leg higher to the 2515-zone.
# Gold rallied through the 55-day Fibonacci step out on 9/3 and that is a sign of strength. The PM sector is now making a typical pullback into the FOMC meeting. Our bias is that gold needs a back test of $1300 to set up the PM sector's next move higher.
# Bonds are holding up well going into the FOMC meeting.
# The corrective bounce in the USD may give us another rally leg into the FOMC minutes. Our bias is still the major bear market scenario, so we're looking for lower lows....

"Central Banks Are Petrified" Chris Martenson On The Hyperinflationary Threat Of "China Dumping The Dollar"

Resource analyst and futurist Chris Martenson says everyone should be taking notice of our “dangerous markets.” At the center of the danger zone is the declining U.S. dollar. Martenson explains, “We are talking about a steady erosion of the dollar as a reserve currency. I think that is most likely. The only thing that could make that really go fast is some kind of war. The United States and China, we got to keep our eye on this because Trump has been threatening a trade war with China. China responded and said if you do that, we may dump the dollar. So, there is all this trade and financial back and forth and maybe even actual war at some point. China has the ability to really impact the dollar in a big way on the world stage. We better hope it does not come to that because a slow erosion we can adjust to; a quick erosion is going to really roil the markets and maybe blow a few of them up.”
# Martenson contends the U.S. could see hyperinflation in a short time if China “dumps the dollar.” Martenson explains, “The way that works is let’s say they want to unload $500 billion on some Tuesday morning. Who is going to buy that $500 billion? Who is on the other side of that trade? Well, if there are not enough people bidding for those dollars, the price has to fall until you find enough people to absorb those, and the dollar would fall in value against all other sorts of other things such as other currencies, oil, gold, silver and all those things. We would be looking for a paired event. What we would be looking for is interest rates starting to rise on Treasuries and the dollar starting to fall in value in value against a variety of things. Once we see those two things, we know we have a financial war or a monetary war. That’s what blows up the derivatives market. That’s what makes difficulties for traders. That’s what makes the high frequency computers say I don’t like this and bolt and instantly evaporate from the markets.”
# Martenson also points out; “The Dow is hitting all-time highs. So, it can’t be that bad, right? The Dow is used as a signaling device, and it says have faith in your leadership and everything is fine. Under the covers, obviously, things are not fine. The people I talk to are nervous and worried. One reason is because it’s fall, and that is sometimes when we see these corrections, but the other reason is everything we track is getting more and more fragile. These markets are held together by confidence. I can’t tell you the number of people that used to be investors that say they just don’t trust these markets. They are rigged and they understand that. They don’t want any part of that.” In closing, Martenson contends, “By many metrics, this market has never been more expensive. What goes up has to come down. I am convinced the central banks are so petrified to let a 1% or a 2% correction happen. What does it mean when the central banks are so petrified that they can even allow a correction to get started? That’s what people should be focused on.”
# Join Greg Hunter as he goes One-on-One with Dr. Chris Martenson of PeakProsperity.com....

Jim Rogers Warns "If Trump Starts A Trade War With China, It Will End US Hegemony"

Following Treasury Secretary Mnuchin's threat that the US could impose economic sanctions on China if it does not implement the new sanctions regime against North Korea: "If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the US and international dollar system, and that’s quite meaningful." Billionaire investor and commodity guru Jim Rogers has a warning for the Trump administration - this would hurt America more because it just forces China and Russia and other countries to cooperate.
RT: What is the likelihood that the US will go through with and actually impose economic sanctions on China if it does not implement the new sanctions regime against North Korea?
Jim Rogers: Sanctions are sanctions. They could do sanctions which are not very important or don’t do much damage. And then they will have good public relations which says they have sanctions, but it is meaningless. I would suspect if anything, that is what they will start with. If they put sanctions on China in a big way, it brings the whole world economy down. And in the end, it hurts America more than it hurts China because it just forces China and Russia and other countries closer together. Russia and China and other countries are already trying to come up with a new financial system. If America puts sanctions on them, they would have to do it that much faster and in the end America will lose its monopoly on the financial system, which will hurt America more than anybody.
RT: What do you think, is it an empty rhetoric and saber-rattling from Donald Trump because he said “those UN sanctions are nothing compared to what ultimately will have to happen” without specifying what he meant by that. Do you think this is just mere bluff on the part of the US, or would it really use the ‘nuclear option’?
JR: If it uses a nuclear option for sanctions, it will hurt America much more than will hurt North Korea, it will hurt America much more than it will hurt China, Russia and everybody else. It will force the rest of the world to find an alternative to the US financial system. If he does that, it is going to cause a lot of turmoil in the world financial economy and in the end it is going to hurt America more than it is going to hurt anybody else. I would give you an example, if you look at Russian agriculture right now, America put sanctions on Russian agriculture trying to hurt Russia, but it has helped Russian agriculture. Russian agriculture is booming now. In the end, America has hurt itself more than it has hurt anybody else.
RT: If that happens, what would the consequences be for the global economy? Could this end up becoming a global economic crisis?
JR: We are probably going to have a global economic problem, maybe even crisis, in the next couple of years. This may be one of the things that start it. There is always something which starts a crisis. If America does something like this, this could be the thing that did it. In 1929, it started when America started a huge trade war with the rest of the world and the economists said, “please, this is a mistake,” but America did that anyway. And then we had a great collapse and The Great Depression of the 1930s.
RT: Washington runs a $350 billion annual trade deficit with Beijing. China also holds more than $1 trillion in US debt. How could the US actually threaten China in such circumstances?
JR: Mr. Trump has been saying for over a year, two years, that he was going to start a trade war with China. He was going to put very high tariffs on Chinese goods. In his mind, he wants to do it, he is ready to do it. Some of his advisors are very much in favor of a trade war. It may very well happen. If it happens, it is going to be very bad for the world and it is going to be worse for America than for other people.
# Furthermore, Beijing has announced plans to start a crude oil futures contract priced in yuan and convertible into gold and Rogers understands how much of a game changer this could be for an industry dominated by the dollar. "This is just another step in that direction. Many people do not like using US dollars because if the US gets angry at you, they just set enormous pressure on you that can even get you out of business. China, Russia, and other countries understand this, and they are trying to move world trade and world finance away from that,” said the Jim Rogers. As China is the world’s biggest crude buyer, the new contract may allow exporters to avoid US sanctions by trading oil in yuan. Such countries as Russia, Iran, Pakistan, Vietnam, China and many other Asian countries are interested in that, according to the expert. The futures contract will allow participants to pay with gold or to convert yuan into gold without the necessity to keep money in Chinese assets or turn it into US dollars.
“The world has been moving that way. Iran will accept renminbi (yuan) from China now. The world is moving that way. China and Russia have currently swaps in rubles and renminbis. It is happening. But it is happening slowly. It takes a lot of time,” Rogers said. The investor stressed the shift is not going to happen swiftly. “In this case, there are so many people that actively want it, I would suspect that in less than ten years you will see a major shift into the trading of oil to Asia,” he said. “When US dollar replaced the pound sterling, there was no one really going around trying to do it quickly. But now you have major economies: Russia, China, Iran and others, very much want this to happen. So, it will happen faster", Rogers added....

Aaron Brown; What Jamie Dimon Got Wrong About Bitcoin And Tulips

The problems cryptocurrencies help solve will not disappear if their prices collapse the way tulip futures did in the 17th century. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon made news last week by criticizing bitcoin. Asking a bank CEO what he thinks of bitcoin is like asking the head of the post office what he thinks of e-mail. In a perfect world, Dimon would note the reasons why people use the cryptocurrency along with the dangers, and explain how JPMorgan is working to provide its customers with the advantages that come with bitcoin in safer forms. Instead, he denounces innovation as fraud and threatens to fire any employee who trades in bitcoin. Dimon compared bitcoin to tulips, which is accurate, though not in the way he intended. Popular notions of the 17th century Dutch Tulipmania are derived from an 1841 book “Extraordinary Popular Delusions and the Madness of Crowds,” by a fact- and logic-challenged journalist named Charles Mackay. Mackay confused two distinct eras. He reports stories from around 1610 about high prices paid for individual bulbs...


What he failed to realize is that people were not paying for single flowers, but for the entire breeding stock, or a significant portion of it, of popular new tulip varieties. People have continued to pay higher inflation-adjusted prices for new tulip and lily bulbs to this day. A quarter century later, a futures market grew up around fractional interests in low-priced, ordinary tulip bulbs. In premodern Europe investment returns were very high, 20 percent or 30 percent per year on low risk investments, but laws and customs prevented anyone not in the merchant class from taking advantage. Holland accidentally created a loophole by allowing contracts for fractional interests in tulip bulbs for the convenience of the industry. These were needed because the price of popular new bulbs was higher than even rich individuals could afford. In the early 1630s ordinary people discovered that these contracts could serve as money to support business and investment. These contracts then became “monetized,” as happens to all assets used as bases for monetary activity. That means their value decoupled from the use value of the underlying asset and became determined by demand for money services.
By 1637, contracts for fractional interests of low-priced tulip bulbs had risen to 20 times the price of the actual bulbs, reflecting the explosion of economic activity they stimulated. In February 1637, the market collapsed; six weeks later it was outlawed. # Something similar happened with bitcoin. People began using it in 2009 because it solved problems of the existing money and banking system: inflation, expropriation, taxes, use restrictions, financial repression and fees, especially for small and cross-border transactions. The economic value of these services serves as the underlying base of value, just like the value of tulip bulbs supported the tulip futures contracts. But bitcoin became monetized and its value far exceeds the current use value in transactions. Its value is now based on projected future need for protection against the problems it solves. If this be fraud, all money is fraud. Dimon went on to claim that governments would suppress bitcoin because they like to control their own monetary policy. This is a strange objection. It seems to assume bitcoin will increase dramatically in value, because it would have to in order to be significant in global money supply. (Full disclosure: I own bitcoins and other cryptocurrencies as well as shares of JPMorgan) A better reason for governments to suppress cryptocurrencies is that they make it easier for people to evade taxes and regulations.
Many of the advantages of a cryptocurrency from a user’s standpoint are disadvantages to people who want to control users. Cash is a far better tool for evasion, and no government has yet outlawed cash, or even stopped printing it. The most financially repressive governments have not taken effective action against cryptocurrencies. Any efforts to suppress simultaneously make cryptocurrencies more valuable. Bitcoin values may well collapse the way tulip futures did, either on their own or due to government efforts. But the problems cryptocurrencies address will not disappear with that collapse. People will continue to pursue technological innovations to improve financial services. The eventual winners may be traditional financial institutions that innovate or new entrants. But it’s a safe bet they will not be financial institutions that fire employees who take bitcoin seriously and ridicule customers who try to help themselves without waiting for JPMorgan to take notice of their problems....

Trump Approves Puerto Rico Emergency Declaration As Maria Strengthens Into "Potentially Catastrophic" Cat-5 Hurricane

Update: The National Hurricane Center reports that Hurricane Maria has just strengthened to a "potentially catastrophic" Category-5 Storm with winds expected over 160mph. Maria's track places her right over the top of Puerto Rico on Tuesday...


President Trump authorizs Homeland Security Dept, FEMA to coordinate all disaster relief efforts, supplementing local response efforts resulting from Hurricane Maria...


Does this look familiar?


As AP reports, Hurricane Maria has intensified into a dangerous Category 4 storm as it bears down on the Caribbean. The National Hurricane Center in Miami said Monday the storm is growing in strength as it approaches land. The eye of the storm is expected to pass near the island of Dominica on Monday evening. The center called the storm "extremely dangerous," with maximum sustained winds of 130 mph (215 kph). At 5 p.m. EDT, the storm was centered about 45 miles (70 kilometers) east-southeast of Dominica. A Hurricane warning has been issued for Puerto Rico, Culebra, and Vieques.
# Less than two weeks after Hurricane Irma hammered the Caribbean, leaving the tiny island of Barbuda uninhabitable and hundreds of thousands of Puerto Ricans without power, Hurricane Maria is expected to follow closely behind its predecessor, delivering another destructive blow to the region before most areas affected by Irma have had time to recover. As Hurricane Maria hastens toward the eastern Caribbean, forecasters are warning that it could strengthen into a major storm by the time it passes through the Leeward Islands later Monday, according to CBS. That poses a huge problem for residents of the Caribbean. After reaching category-one hurricane strength on Sunday, CBS reports that Maria is expected to quickly become much stronger over the next two days and follow a path that would take it near many of the islands wrecked by Hurricane Irma and on to Puerto Rico, the Dominican Republic and Haiti. The National Hurricane Center has already issued advisories for much of the Caribbean. Here’s a summary of the NHC’s latest update, including stats about Maria’s location and attributes as of 5 a.m. Monday. Note that the storm has maximum wind speeds of 90 mph. "Significant strengthening is forecast during the next 48 hours, and Maria is expected to become a dangerous major hurricane before it moves through the Leeward Islands," according to the National Hurricane Center's latest update....

Offshore Yuan Tumbles To 2-Week Lows, Biggest Drop Since Election

Offshore yuan has now dropped almost 16 handles in the last 8 days since Chinese officials voiced their concerns "about a rallying yuan as exporters come under strain"...


Tonight's tumble pushes the Yuan to its lowest since August for the biggest 8-day drop since the election...


And offers Trump some excuses to be mad at China for 'devaluing' their currency after the dollar dumped for most of the year...


Notably, while Yuan is tumbling, Hong Kong Dollar spiked back toewards the peg...

US Is Sending Another Aircraft Carrier To Korea

After carrying out bombing drills over the Korean peninsula on Monday following North Korea’s firing of an intermediate-range missile over the Japanese island of Hokkaido, US and South Korean forces are planning to continue their displays of military might early next month, according to a report from Yonhap, the South Korean news agency. However, in a move that is sure to provoke a barrage of threats from North Korea, the US is reportedly sending a nuclear-armed aircraft carrier to the waters off the Korean peninsula, where it will take part in an upcoming round of military drills. Earlier this year, the US sent three aircraft carriers to waters near North Korea in an unprecedented show of force. However, it's unclear if any of those carriers are still positioned so closely to the peninsula. Here's the latest map of US naval strike groups, which was compiled by Stratfor using publicly-available information. Deployments considered "sensitive" would not be included on this map...


As Yonhap reports, the aircraft carrier will participate in a series of naval drills with South Korean forces. Yonhap didn’t reveal the name of the carrier. South Korea and the US will also conduct a “combined missile alert drill” in late September or early October, for which they will be joined by Japan, Yonhap said, citing a source in South Korea’s Ministry of Defense. The US is also expected to once again send B-1B strategic bombers stationed in Guam to Korea later this month in a warning to the North...


However, given UN Ambassador Nikki Haley’s revelation that the UN Security Council may have reached the limits of its ability to economically pressure the isolated country, it’s understandable that the US would want to signal an escalation in its flexing of military muscle, to show. After all, the US needs to maintain the illusion that “military options” remain on the table. Even though, as former White House Chief Strategist Steve Bannon confirmed in an interview before he was ousted from the West Wing, there aren’t any options available to the US that wouldn’t lead to millions of civilian deaths in Seoul from conventional weapons fire. US, Japanese and South Korean officials believe North Korea is “in the final stages” of developing a long-range ballistic missile that would be able to reliably strike the Continental US. The North believes obtaining such a weapon is essential to the regime's survival, but the prospect of a nuclear-armed North Korea, which is already, in a sense, a reality, has horrified the international community. According to Yonhap, the South Korean defense ministry expects the North to soon carry out more missile tests, as well as an expected seventh nuclear test.
To be sure, news of the aircraft carrier being sent to the waters around the Korean peninsula may remind readers of President Donald Trump’s promise to send a strike force of nuclear-armed submarines to the waters of the peninsula earlier this year, only for media reports to confirm that the submarines were, in fact, headed in the other direction. Assuming the carrier is, in fact, headed to its reported post, such an act would be interpreted as an unprecedented provocation by Kim Jong Un and his generals, and likely demand a response in kind....