>>> Asian Update

Asia Mid-Session Market Update: Takata enters bankruptcy; FX majors quiet ahead of US durable goods report

***Friday US Session Highlights***
- (US) JUN PRELIMINARY MARKIT MANUFACTURING PMI: 52.1 V 53.0E
- (US) MAY NEW HOME SALES: 610K V 590KE; Median price: $345.8K v $310.2K prior
- Major indices in New York are mixed, firming up after some early downward momentum. A weaker than expected Markit manufacturing PMI reading sent the Dollar to a session low against the Yen, but markets were buoyed by a beat in US new home sales data just minutes later. USD/CAD spiked after Canada May CPI came in lower than anticipated, which is seen as muting BOC rate hike expectations. The energy complex has been lifted by crude prices bouncing off their lows, and healthcare names have retreated from yesterday's highs as attention remains on Washington's ACA repeal efforts.

***Politics***
- (US) Sen Collins (R-ME) awaiting Congressional Budget Office review of Senate healthcare legislation proposal before deciding on whether she will support the bill - US press
- (DE) Germany Social Democratic chancellery candidate Martin Schulz rejects a grand coalition lead by Angela Merkel’s CDU/CSU; Calls for Chancellor Merkel to go further in spurring "erratic" US Pres Trump - press
- (JP) Japan PM Abe cabinet approval rating falls another 9pts to 39% - Yomiuri
- (JP) Ahead of July 2nd metropolitan assembly election in Tokyo, ruling LDP party trails Gov Yuriko Koike's new political group "Tokyoites first" by 26.7% to 25.9% margin - Nikkei

***Key economic data:***
- none seen

***Asia Session Notable Observations***
- Takata finally succumbs to bankruptcy in New York and Japan filings; Trading suspended.
- BoJ summary of opinions from last meeting reiterates concerns over slow progress in wage and price inflation while praising improved Consumption sentiment. Recall the last BOJ decision raises Consumption assessment while maintaining policy settings unchanged.
- Approval rating for Japan PM Abe continues to crater amid unfolding political scandals.
- PBoC sets Yuan firmer for the first time in 5 days; FX majors in very narrow ranges.

***Speakers and Press***
China
- (CN) China’s National Development and Reform Commission (NDRC) has asked all coal miners to curb thermal coal prices at CNY570/t
- (CN) China Premier Li calls for more investment in industries such as artificial intelligence, quantum science, gene editing, new materials and new energy - Chinese press

Korea
- (KR) Bank of Korea (BOK) regional growth report: Economy is expected to see gradual improvement this year thanks to manufacturing and services
- (KR) South Korea President Moon said to be under pressure to drop protectionism

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.1%, Hang Seng +0.4%, Shanghai +0.6%, ASX200 +0.1%, Kospi +0.4%
- Equity Futures: S&P500 +0.1%; Nasdaq +0.1%, Dax +0.1%, FTSE100 +0.1%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.1190-1.1200; JPY 111.15-111.35; AUD 0.7560-0.7585; NZD 0.7270-0.7290; GBP 1.2730-1.2755
- Aug Gold flat at 1,256/oz; Aug Crude Oil +1.3% at $43.55/brl; Sept Copper -0.1% at $2.63/lb
- (US) Weekly Baker Hughes US Rig Count: 941 v 933 w/w (+0.8%) (23rd straight weekly rise)
- SPDR Gold Trust ETF daily holdings fall 3.0 tonnes to 851.0 tonnes
- (CN) PBOC SETS YUAN MID POINT AT 6.8220 V 6.8238 PRIOR; first firmer Yuan fix in 5 sessions
- (CN) PBoC: To skip today's open market operation (OMO); 2nd straight skip; Drains CNY50B
- (KR) South Korea Finance Ministry sells 20-yr treasury bonds; avg yield 2.190%

***Asia equities / Notables / movers***
Hong Kong
- epring Group (1884) +5.7%; Reports FY17 (HK$) Net 22.2M v 29.7M y/y; Rev 390.6M v 382.8M y/y
- ICBC (1398) +0.6%; Responds to media reports that it had been ordered to assess credit risks, saying checks of loans to companies that made overseas acquisitions is routine
- International Entertainment Corporation (1009) -2.5%; Reports FY17 (HK$) Net 66.1M v 45.2M y/y; Rev 290.7M v 330.9M y/y
- Upbest Group (335) -8.0%; Reports FY17 (HK$) Net 225.9M v 518.2M y/y; Rev 317.5M v 443.4M y/y

Australia
- Metcash (MTS) +3.4%; Reports FY17 adj Net A$194.8M v A$186Me; EBIT A$296.7M v A$287Me; Rev A$14.13B v A$14.1Be
- Rio Tinto (RIO) +0.9%; Confirms receipt of revised proposal from Glencore plc to acquire Rio Tinto's wholly-owned Australian subsidiary; Yancoal considering matching Glencore bid for Coal & Allied - AFR

Japan
- Kirin (2503) +0.5%; Looking to sell its dairy business, have received some interest in parts of the business, but the company is aiming to sell the entire operation - AFR
- Honda (7267) flat; Takata decision has limited impact on FY17 earnings; no decision reached over inflator recall responsibilities; Nissan (7201) +0.1%; set aside appropriate reserve related to Takata recall

FT : Rome sets aside €17bn to wind down failing lenders

Rome sets aside €17bn to wind down failing lenders
Intesa to partially acquire Veneto lenders to avoid a bank run

Italy has moved to shore up confidence in its fragile banking system after agreeing to pump €5bn of taxpayers’ money into two failed mid-sized banks while handing their good assets to Intesa Sanpaolo, the country’s strongest lender.

Veneto Banca and Banca Popolare di Vicenza, based in the country’s prosperous industrial north-eastern Veneto region, will be wound down by Italian authorities after the European Central Bank said they were failing.

Pier Carlo Padoan, Italy’s economy minister, said on Sunday that the state would offer additional guarantees of up to €12bn — meaning a possible total of €17bn — to cover losses from the two banks’ bad loans. He said the initial €5.2bn included €4.8bn for Intesa to maintain its capital ratios following the acquisition of the Veneto banks, as well as a further €400m in guarantees against the risk that some of the credits acquired by Intesa turn sour.

Italy’s financial system has already put €3.5bn into the Veneto banks in the past year via the government-sponsored backstop fund Atlante.

Paolo Gentiloni, Italy’s prime minister, said the intervention was “important, urgent and necessary” to prevent a “disorderly failure” of the two banks.

The move by Italy’s government, which spent the weekend frantically drawing up the complicated decree, will in effect mean that the Veneto banks’ branches and employees will be part of Intesa Sanpaolo by Monday morning, a move considered crucial to avoid a deposit run, say people briefed on the discussions. The decree still needs to be voted into law by parliament within 60 days.

The drawn-out handling of the Veneto crisis has wider implications for Europe’s banking union, which aims to integrate oversight of eurozone lenders partly based on the assumption that private creditors would cover bank failure costs, rather than taxpayers.

The Italian state intervention to protect senior bondholders and big depositors runs counter to that principle but has been allowed because the banks’ liquidation means there are no competition issues.

Germany has long been concerned at Italy’s unwillingness to address banking problems and apply bail-in rules, as well as its attempts to sidestep curbs on state aid.

The Italian move comes just weeks after Spain’s Banco Popular avoided being wound down after a rescue from larger rival Santander.

Italy has already closed four small lenders and is undertaking a precautionary recapitalisation of Monte dei Paschi di Siena, Italy’s fourth-largest bank by assets, since the ECB took over banking supervision.

Carlo Messina, Intesa’s chief executive, said the deal was the only “significant offer” the government received. He added that without it, the crisis of the two banks would have had a grave impact on the entire Italian financial system with dramatic consequences for the Italian economy.

Intesa Sanpaolo, Italy’s best-capitalised large bank, said last week it was open to purchasing the rump of the good assets for a token price on condition that Italy’s government passed a decree agreeing to shoulder the cost of liquidating the lenders’ bad loans, paying for at least 4,000 lay-offs and incurring any legal risks.

The future of the Veneto banks has hung in the balance over the past two years since ECB regulators uncovered a capital hole caused by a surge in bad loans, which compounded a financial mis-selling scandal.

The length of time it has taken for regulators to come to any decision on the banks, which passed European bank health checks in 2014, has also raised serious questions about their supervision. Deposit flight at the banks has accelerated as regulators debated how to proceed, according to people informed on the matter.

Another midsized regional lender, Genoa’s Carige, is considered at risk of being wound down if it fails to shore up its balance sheet, say people close to talks with authorities.

>>> Alitalia has AirAsia and CityJet among bidders

Alitalia has AirAsia and CityJet among bidders - report (translated)

Alitalia, the Italian airline in administration, has lowcost carriers Malaysian-based AirAsia [KLSE: AIRASIA] and Irish-based CityJet among its potential bidders, Italian language daily Il Corriere della Sera reported.
The unsourced report said that both carriers had expressed manifestations of interest.
The item said that CityJet is owned by Austrian airline InterSky.

FT : Italy pumps €5bn of taxpayers money into two failing lenders

Italy pumps €5bn of taxpayers money into two failing lenders
Intesa set to partially acquire Veneto lenders to avoid a bank run

Italy has moved to shore up confidence in its fragile banking system after agreeing to pump €5bn of taxpayers’ money into two failed mid-sized banks while handing their good assets to Intesa Sanpaolo, the country’s strongest lender.

Veneto Banca and Banca Popolare di Vicenza, based in the country’s prosperous industrial north-eastern Veneto region, will be wound down by Italian authorities after the European Central Bank said they were failing.

Pier Carlo Padoan, Italy’s economy minister, said on Sunday that the state would offer additional guarantees of up to €12bn — meaning a possible total of €17bn — to cover losses from the two banks’ bad loans. He said the initial €5.2bn included €4.8bn for Intesa to maintain its capital ratios following the acquisition of the Veneto banks, as well as a further €400m in guarantees against the risk that some of the credits acquired by Intesa turn sour.

Italy’s financial system has already put €3.5bn into the Veneto banks in the past year via the government-sponsored backstop fund Atlante.

Paolo Gentiloni, Italy’s prime minister, said the intervention was “important, urgent and necessary” to prevent a “disorderly failure” of the two banks.

The move by Italy’s government, which spent the weekend frantically drawing up the complicated decree, will in effect mean that the Veneto banks’ branches and employees will be part of Intesa Sanpaolo by Monday morning, a move considered crucial to avoid a deposit run, say people briefed on the discussions. The decree still needs to be voted into law by parliament within 60 days.

The drawn-out handling of the Veneto crisis has wider implications for Europe’s banking union, which aims to integrate oversight of eurozone lenders partly based on the assumption that private creditors would cover bank failure costs, rather than taxpayers.

The Italian state intervention to protect senior bondholders and big depositors runs counter to that principle but has been allowed because the banks’ liquidation means there are no competition issues.

Germany has long been concerned at Italy’s unwillingness to address banking problems and apply bail-in rules, as well as its attempts to sidestep curbs on state aid.

The Italian move comes just weeks after Spain’s Banco Popular avoided being wound down after a rescue from larger rival Santander.

Italy has already closed four small lenders and is undertaking a precautionary recapitalisation of Monte dei Paschi di Siena, Italy’s fourth-largest bank by assets, since the ECB took over banking supervision.

Carlo Messina, Intesa’s chief executive, said the deal was the only “significant offer” the government received. He added that without it, the crisis of the two banks would have had a grave impact on the entire Italian financial system with dramatic consequences for the Italian economy.

Intesa Sanpaolo, Italy’s best-capitalised large bank, said last week it was open to purchasing the rump of the good assets for a token price on condition that Italy’s government passed a decree agreeing to shoulder the cost of liquidating the lenders’ bad loans, paying for at least 4,000 lay-offs and incurring any legal risks.

The future of the Veneto banks has hung in the balance over the past two years since ECB regulators uncovered a capital hole caused by a surge in bad loans, which compounded a financial mis-selling scandal.

The length of time it has taken for regulators to come to any decision on the banks, which passed European bank health checks in 2014, has also raised serious questions about their supervision. Deposit flight at the banks has accelerated as regulators debated how to proceed, according to people informed on the matter.

Another midsized regional lender, Genoa’s Carige, is considered at risk of being wound down if it fails to shore up its balance sheet, say people close to talks with authorities.

>>> What to look at this Week End - 24th & 25th of June 2017

Weekly Update
Dow +0.05% S&P +0.21% Nasdaq +1.84% Russell +0.57% Mexico -0.49% Brazil -0.88% (-2.38% in $) Nikkei +0.95% Hang Seng +0.17% CSI +2.96% Shanghai +1.11% EuroStoxx -0.01% FTSE -0.53% CAC +0.05% Dax -0.15% Ibex -1.20% MIB -0.51% SMI +0.78%
The markets had a mixed week, with the S&P and Dow ending about flat while the Nasdaq lifted nearly 2%, boosted by the best week for biotech and hospitals since the election, as the Republican Obamacare replacement bill hit some legislative snags in the Senate. US new and existing home sales data was a bright spot, coming in higher than expected and with record high home prices in May. Also the 34 largest financial institutions monitored by the Fed all passed their annual stress tests. Oil price declines dragged the energy sector to its worst week since February, with crude finishing lower for a fifth consecutive week and WTI closing at a 10-month low on Wednesday. Small-cap stocks gained Friday for the third time this week, and the Russell 2000 pared earlier losses to close the week almost flat amid the annual reconstitution of the Russell US Indexes. Despite higher volumes in the Nasdaq, volatility remained muted, with the VIX hitting a four-day low on Friday. For the week, the S&P rose 0.2%, the DJIA gained less than 0.1%, and the Nasdaq added 1.8%.

Macro :
- France to Unveil Environment Roadmap by End-July, Macron Says
- Hedge Funds Go All-In on VIX Shorts Again: CFTC
- EU Commission in Talks With Italy on Aid for Failed Veneto Banks
- French Government Spokesman Castaner Sees No Tax Hike: RTL Radio

Keep an eye on :
- AB1 GY : Lufthansa CEO Rules Out Air Berlin Takeover for Now: BamS
- ALV GY : Allianz Sells Oldenburgisch LB Stake to Bremer Kreditbank
- ATC NA : Altice, Prisa Lawyers Had Meetings on Media Capital: Expresso
- ARM LN : ARM Holdings Invests GBP17m in Blu Wirless: Sunday Telegraph
- CLLN LN :
- COL SM : Spain’s Colonial to Invest Up to EU400m Per Year, CEO Tells ABC
- DAI GY : Daimler to Make Only Electric Smart Cars From 2020/21: Manager
- DAI GY : Diesel Engines Emit Less CO2, Daimler CEO Tells Deutschlandfunk
- DLG GY : Dialog Semiconductor CEO Sees Return to Growth in 2017: FuW
- EDF FP : EDF Hinkley Audit Shows Up To 3 Billion Euros Extra Cost: Monde
- ERF FP : Eurofins Seeking Acquisitions of All Sizes, CEO Tells Investir
- FCA IM : Fiat Chrysler Said to Have Halted Output of Pacifica Hybrid: WSJ
- FNC IM : Fincantieri Gets Export Finance Approval for Qatar Deal: Sole
- HNR1 GY : Hannover Rueck CFO Sees ECB Rates Staying Low for Years: Euro
- HIS SM : Hispania Aims to Sell Office Portfolio by Year End: Economista
- LHA GY : Lufthansa CEO Rules Out Air Berlin Takeover for Now: BamS
- MS US : Morgan Stanley May Add 200 Jobs in Frankfurt Over Brexit: WamS
- SBRY LN : Sainsbury Promises Nisa Independence on Takeover: Telegraph
- UBSG VX : UBS CEO Says Bank Regulation Lacks Political Discussion: Blick
- WFM US : Wal-Mart Said Not Considering a Bid for Whole Foods: Reuters

(ZH) "It’ll Be An Avalanche": Hedge Fund CIO Sets The Day When The Next Crash Be

"It’ll Be An Avalanche": Hedge Fund CIO Sets The Day When The Next Crash Begins

While most asset managers have been growing increasingly skeptical and gloomy in recent weeks (despite a few ideological contrarian holdouts), joining the rising chorus of bank analysts including those of Citi, JPM, BofA and Goldman all urging clients to "go to cash", none have dared to commit the cardinal sin of actually predicting when the next crash will take place.
On Sunday a prominent hedge fund manager, One River Asset Management's CIO Eric Peters broke with that tradition and dared to "pin a tail on the donkey" of when the next market crash - one which he agrees with us will be driven by a collapse in the global credit impulse - will take place. His prediction: Valentine's Day 2018.
Here is what Peters believes will happen over the next 8 months, a period which will begin with an increasingly tighter Fed and conclude with a market avalanche:


“The Fed hikes rates to lean against inflation,” said the CIO. “And they’ll reduce the balance sheet to dampen growing financial instability,” he continued. “They’ll signal less about rates and focus on balance sheet reduction in Sep.”

Inflation is softening as the gap between the real economy and financial asset prices is widening. “If they break the economy with rate hikes, everyone will blame the Fed.” They can’t afford that political risk.

“But no one understands the balance sheet, so if something breaks because they reduce it, they’ll get a free pass.”

“The Fed has convinced itself that forward guidance was far more powerful than QE,” continued the same CIO.

“This allows them to argue that reversing QE without reversing forward guidance should be uneventful.” Like watching paint dry. “Balance sheet reduction will start slowly. And proceed for a few months without a noticeable impact,” he said. “The Fed will feel validated.” Like they’ve been right all along.

“But when the global credit impulse reverses, it’ll be a cascade, an avalanche. And I pin the tail on that donkey to be Valentine’s Day 2018.”
Of course, the global credit impulse is something that we have been exclusively warning about for the past 4 months...

TheVerge : Scientists are racing to predict where the next pandemic will start

Scientists are racing to predict where the next pandemic will start

In a race to prevent future deadly pandemics, scientists are trying to pinpoint the animals and regions where the next Ebola or Zika might arise — before the viruses start harming people. But some experts argue that it makes more sense to look for new viruses in humans, not other animals. In fact, the next emerging infectious disease is probably already out there, making people sick.

Animals host a massive number of viruses, and sometimes these viruses make the jump to humans. (These viruses are called zoonoses.) This happens pretty rarely, but when it does, it can wreak havoc: most pandemics in recent memory like HIV, pandemic influenza, and Zika were caused by viruses that started out in animals. The Ebola virus, which probably jumped from bats, killed more than 11,000 people during the recent outbreak in West Africa.

If there were a way to predict which infectious disease might emerge and threaten humans next, maybe it could give us a head start on a vaccine, or prevention strategy. But the challenge is even more complicated than you’d think, because where exactly do you go looking for the next pandemic? In animals, which carry a vast array of viruses that might never infect people? Or in humans, once a virus has made that rare leap — but before it spreads out of control?

Peter Daszak, an epidemiologist with the research and conservation nonprofit EcoHealth Alliance, wants to find these viruses before they make anyone sick. “If we allow these viruses to get into people, it’s already too late,” he says.

To do that, he and his team hunted through the scientific literature to create a database of nearly 600 viruses and the more than 750 mammals they infect. Then, the researchers looked for patterns that could help them understand what makes an animal virus more likely to infect humans. Their research was published this week in the journal Nature.

A few clear trends emerged: animals that are closer to humans geographically (like rats) and genetically (like monkeys and apes) have a better shot at sharing their viruses with us. Animals harboring more virus species in general (like bats) are more likely to carry one that could sicken humans. And viruses that are transmitted by mosquitoes and can infect a broad range of species tend to hop into humans more successfully. These are trends that previous studies also identified, but finding them with this new method is a reassuring reality check, says Barbara Han, a disease ecologist at the Cary Institute of Ecosystem Studies, who was not involved in the research.

Using these patterns, the researchers then mapped where unknown zoonoses might be hiding: in Central and South American bat populations, for instance, or rodents in North and South America. These aren’t predictions about precisely where the next virus will emerge, Daszak says. But these maps could help steer research efforts like Global Virome Project, a $3.4 billion proposal supported by organizations that include the EcoHealth Alliance to sample and genetically sequence 99 percent of the viruses that could one day threaten humans. (Sequencing a virus is an early step toward attempting to make a vaccine.) “Right now, we’re always on defense,” Han says. “The important thing about figuring out where the next one is likely to happen is that it gives us a leg up.”

But some researchers say that spotting the next pandemic before it starts will take more than sequencing the viruses that currently infect animals. “While most pandemics are zoonoses, most zoonoses do not cause pandemics,” infectious disease expert James Lloyd-Smith writes in a commentary published alongside the Nature paper. So, it’s important to figure out the factors that drive a virus to spread across the globe. This depends more on human-to-human than animal-to-human transmission, he writes.

That’s because there are a lot of hurdles that an animal virus has to clear before it spreads to a person, and from there, to another person. “A virus doesn’t just jump out of a bat and cause an epidemic in humans,” says Ronald Rosenberg, an infectious disease researcher. Instead, a virus can spend decades or even centuries hopping back and forth between animals and humans before the conditions come together for an outbreak. (The exception are influenza viruses, which can make this leap more rapidly, Rosenberg says.)

For example, scientists discovered the Zika virus in monkeys living in the treetops of an Ugandan forest in 1947 — decades before it caused the first large outbreak on the island of Yap in 2007, and nearly 70 years before it spread across the globe. Yet, the virus still managed to catch the world unprepared: in fact, scientists are still racing to develop a vaccine or cure. “It wasn’t really a matter of whether we could find these viruses early in animals,” Rosenberg says. “We needed to examine them more closely after they were found in humans.”

What we really need, experts like Lloyd-Smith and Rosenberg say, is better surveillance in human communities — especially in ones that frequently come into contact with wildlife. That means setting up sentinel clinics in viral hot spot regions that can screen sick patients for the usual infectious suspects. Central laboratory facilities could hunt for less typical, or completely unknown, infections, if those initial screens come up negative. Rosenberg is currently piloting such a system in Uganda.

It’s possible the next pandemic could already be infecting people, but without the time, money, or tools to identify the cause of every fever or illness, doctors and scientists might miss it. “We don't really have the wherewithal to identify epidemics as they're beginning in the human population,” Rosenberg says. “We miss opportunities many, many times every day.”

“There’s a big gap there,” Daszak agrees. “There are outbreaks that go undiagnosed.” Still, he hopes that his team’s hot spot map can help target surveillance efforts in humans, too. While more data can’t breach the financial barriers to better virus detection in people, the stakes are too high to sit still. Daszak says: “My biggest fear is that we don’t do anything, and we discover these viruses the hard way by them emerging and killing people.”

>>> Rio Tinto weighs new offer for Coal & Allied Industries from Glencore

Rio Tinto weighs new offer for Coal & Allied Industries from Glencore

Rio Tinto [ASX:RIO, LON:RIO] acknowledges that on 23 June it received a revised proposal from Glencore [LON:GLEN] to acquire Rio Tinto's wholly-owned Australian subsidiary, Coal & Allied Industries Limited.
The Rio Tinto board will give the new proposal appropriate consideration and will provide a further update in advance of the general meeting of Rio Tinto plc to be held in London at 11am on Tuesday 27 June 2017.
If Glencore's revised proposal is deemed to be a superior proposal under the terms of the sale and purchase agreement with Yancoal and the Rio Tinto board decides the revised proposal is in the best interests of shareholders, then the Rio Tinto board intends to adjourn the general meeting of Rio Tinto plc. The matching rights process, pursuant to which Yancoal will have two business days to present a counter offer, would then be implemented.
If the Rio Tinto board decides to reject Glencore's revised proposal, then the general meeting of Rio Tinto plc is expected to proceed as currently scheduled. In the event that the Rio Tinto board requires additional time to give the Glencore proposal appropriate consideration then the Rio Tinto board may adjourn the general meetings of Rio Tinto plc and Rio Tinto Limited.