Why Walmart Has 22 Secret Subsidiaries In Luxembourg

Walmart has chipped $3.5 billion off its income tax liabilities over the past six years by stashing $76 billion in profits in offshore tax havens using a complex network of well-disguised subsidiary corporations, according to new research from one of the unions that backs long-running efforts to organize workers at the American retail giant.

The researchers combed financial disclosure documents from the U.S. and multiple other countries to uncover 78 separate Walmart subsidiaries with names like “Azure Holdings” that do not suggest that they are connected to the Arkansas-based chain of stores. Walmart “has never listed any of them” on the subsidiaries section of a required annual corporate filing with American regulators, the United Food and Commercial Workers (UFCW) report says. The company has no physical locations in those countries, but routes revenue from its thousands of international stores through the companies, about half of which are registered in Luxembourg, the Virgin Islands, and the Netherlands.

In Luxembourg, the alleged tax-reduction strategy relies on a financial shell game. The company has shifted $45 billion in assets into its 22 subsidiaries there in the past four years, but reported only a fraction of that amount in profits. It paid a 1 percent tax rate in Luxembourg on $1.3 billion in profits from 2011 to 2013, according to the report. Like most other high-profile corporate tax avoiders, Walmart has achieved its massive tax savings through careful use of legal tax strategies. International tax rules involving loans between two different subsidiaries of the same company mean that Walmart can take out debt from itself, deduct the debt in one country, and pay low or non-existent tax rates on interest payments associated with the loan in a second country.

A company spokesman told Bloomberg that the report is inaccurate and misleading, and said the company complies fully with all the tax laws and corporate disclosure rules of every country in which it does business.

Legal though it may be, the network of holding companies and intermediaries is critical to the company. The $76 billion held in Luxembourg and the Netherlands alone is equal to nearly 40 percent of the company’s total assets worldwide, and 90 percent of the assets claimed by its international division. Researchers note that the total value of offshored Walmart profits may be even higher, as the other tax haven countries’ public records laws do not make similar financial detail available for those operations.

Shifting corporate profits across borders is common among multinational companies in all industries, but most of the recent furor around the practice is focused on the tech sector. Brands like Apple, Google, Microsoft, and Amazon have had their arrangements in Ireland and other European tax havens called into question by American and European Union officials. In an industry where intellectual property (IP) rights are often the key to profitability, it’s relatively easy to understand how the game works. Regardless of which country served as the cradle of innovation for the iPhone, Apple can shift the IP rights to a subsidiary in a lower-tax country. Apple pays U.S. taxes on the royalties the subsidiary pays for the rights, but not on the much larger profits from selling iPhones, which remain abroad in the subsidiary. Those arrangements have come under legal scrutiny in the the past year.

Achieving the same kind of tax benefits is messier in the retail industry. Walmart is in the business of physical things, not ideas. That’s why it has to use a system of intra-Walmart loans and tax deductions to achieve the same sort of tax sheltering outcome that the techies arrive at through royalties payments. But those loans are also in Europe’s gunsights. The Organization for Economic Cooperation and Development has called for changes that would make that loan-and-deduct strategy unfeasible, according to Bloomberg.

All told, corporate profit offshoring costs the U.S. an estimated $50 billion per year in lost revenue. American companies now hold more than $2 trillion in profits offshore.

http://thinkprogress.org/economy/2015/06/17/3670894/walmart-offshore-profits/

EES: Foreign currency is debt, so says the IRS in this ruling

No comment.

Section 988.--Treatment of Certain Foreign Currency Transactions

An instrument that requires payments to be made in a foreign currency (that is, nonfunctional currency) can be debt for U.S. federal income tax purposes.

Click here to view / download IRS PDF Section 988.--Treatment of Certain Foreign Currency Transactions 

Original source from irs.gov:  https://www.irs.gov/pub/irs-drop/rr-08-1.pdf

Martin Shkreli's KaloBios Files Chapter 11: Full Bankruptcy Filing

Over a month ago, when observing (from as far away as possible) the farce of Marti Shkreli's attempt to squeeze KBIO shorts in the context of the infamous Joe Campbell who was short KaloBios only to suffer a $100K margin call overnight when Martin Shkreli bought a 70% stake in the company, we wrote:

Which brings us back to Joe Campbell and his now famous margin call: did he liquidate enough other assets to cover the margin call? What about the hundreds of other shorts who piggybacked and shorted at the close yesterday only to wake up with comparable massive margin calls?

And what happens if Shkreli's plan is indeed to rerun the "Volkswagen" scenario and unleash an epic short squeeze that sends the price of the company into the stratosphere,unlinked from any fundamentals, but merely soaring ever higher as desperate shorts pay any price just to get out.

We hope to find out, as suddenly this until recently bankrupt company whose price has exploded in the past two days, has become not only a poster child for everything broken and manipulated with the market (think 2014's CYNK one year forward) but has the market following with morbid fascination to find out how the tragicomedy of "Shkreli vs the Shorters" concludes.

We now know how the story ends: less than two months after KaloBios had commenced liquidation proceedings, only to be saved in the last moment by a Martin Shkreli liquidity injection, the company is right back in bankruptcy court having just filed for Chapter 11 creditor relief in Delaware bankruptcy court. This takes place a week after it lost two more directors and the Nasdaq stock market decided to delist its shares.

In its bankruptcy filing, KBIO lists $8.4 million in assets and $1.9 milion in debt.

How did the company's truncated board decide on a Chapter 11 filing? From the filing:

Effective as of this 29th day of December, 2015, pursuant to a special telephonic meeting on the same date, the board of directors (collectively, the “Board of Directors”) of KaloBios Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), upon a motion duly made and acting pursuant to the Corporation’s organizational documents, took the following actions and adopted the following resolutions:

WHEREAS, the Board of Directors has considered information regarding the liabilities and liquidity of the Corporation, the strategic alternatives available to the Corporation, and the impact of the foregoing on the Corporation’s business; and

WHEREAS, the Board of Directors has had the opportunity to consult with the Corporation’s management and financial and legal advisors to fully consider each of the strategic alternatives available to the Corporation; and

WHEREAS, the Board of Directors has been presented with a proposed petition to be filed by the Corporation in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (as amended, the “Bankruptcy Code”); and

WHEREAS, the Board of Directors desires to approve the following resolutions

NOW, THEREFORE, BE IT RESOLVED, that in the judgment of the Board of Directors, it is desirable and in the best interests of the Corporation, the creditors of the Corporation, and other interested parties that a voluntary petition (the “Petition”) be filed in the Bankruptcy Court by the Corporation to initiate a bankruptcy case (the “Chapter 11 Case”) under the provisions of chapter 11 of the Bankruptcy Code;

Thus ends KaloBios' "turnaround in progress" - two months after it was
dragged out of bankruptcy by Martin Shkreli in an attempt to crush the company's shorts and unleash a massive squeeze, Kalobios is again, well, bankrupt.

The full filing is below:

http://www.zerohedge.com/news/2015-12-30/martin-shkrelis-kalobios-files-chapter-11-full-bankruptcy-filing#comment-6978280

Checkout KBIO Class Action Homepage at Steinmeyer Law

JP Morgan Employees Said To Steal $400,000 From Eight Dead Clients

In the wake of 2008, it’s probably safe to say there isn’t a person alive who completely trusts a banker. 

If, however, you happen to be dead, it’s more difficult to scrutinize the activities of those conducting your finances, a fact underscored by the alleged theft of hundreds of thousands of dollars from at least eight accounts belonging to deceased clients of JP Morgan. 

According to an indictment filed this month in State Supreme Court in Brooklyn, Jonathan Francis and Dion Allison, employees at a Bedford-Stuyvesant branch, made hundreds of withdrawals from the accounts using ATM cards they issued. One of those charged told investigators he "used the log-on IDs of co-workers when they walked away from their desks," Bloomberg reports.

As The New York Times goes on to recount, “Mr. Allison, 30, and Mr. Francis, 27, created bank cards for several of the dormant accounts [and] with two friends, Gregory Desrameaux, 24, and Kery Phillips, 40, the men then withdrew most of the stolen money, about $300,000, by using A.T.M.s around New York City.” 

(from left: Francis, Allison, Desrameaux)

But it gets worse. Here’s more from The Times:

In April 2013 alone, members of the group made withdrawals on 26 of 30 days, according to the indictment. One night at a Chase branch at Nostrand and Church Avenues, they withdrew $1,000 from one account; 49 seconds later, group members took out $1,000 from a different account.

By May of that year, people in the group had created fake power of attorney documents. That gave Mr. Phillips control of four of the dormant accounts, Adam Zion, an assistant district attorney, said in court on Monday.

This allowed Mr. Phillips to withdraw much more money than the daily A.T.M. limit, up to $9,500 at a time, through a teller.

In another example of the scheme, in February 2013, according to the indictment, Mr. Allison created a bank card for one account. That May, at a Chase branch on Flatbush Avenue, Mr. Phillips turned in fake power of attorney documents giving him control of the account. The same day, prosecutors said, Mr. Phillips withdrew through a teller $49,929.91 — everything that remained — from the account.

The four face charges of conspiracy, grand larceny and falsifying business records and could face up to 15 years in prison if convicted.

Allison was arraigned on Monday. Francis denies the allegations as does Desrameaux. Phillips is in the wind apparently. As others have noted, this isn't the first time JP Morgan employees have stolen from customer accounts. Earlier this year, Michael Oppenheim, an investment adviser, was charged with stealing $20 million from seven of his clients while Peter Persaud, who also worked at a Brooklyn branch, allegedly sold client account numbers, Social Security numbers, and DOBs to an undercover agent. 

So while you can apparently still go to jail for robbing clients the old fashioned way, JP Morgan, like its bulge bracket brethren, can count on token fines and wrist slaps for rigging FX markets, diverting excess deposits to massive curve trades in off-the-run CDS indices, and other instances of more "innovative" highway robbery.

And the punchline to the whole story: it comes courtesy of weak internal procedures meets Washington's grossly inefficient bureaucracy:

While prosecutors believe most, if not all, of the account holders have died, benefit checks continued to be deposited because of faulty reporting to the Social Security Administration.

http://www.zerohedge.com/news/2015-12-29/jp-morgan-employees-said-steal-400000-eight-dead-clients 

Shkreli, CEO Reviled for Drug Price Gouging, Arrested on Securities Fraud Charges

Martin Shkreli, the boyish drug company entrepreneur, who rocketed to infamy byjacking up the price of a life-saving pill from $13.50 to $750, was arrested by federal agents at his Manhattan home early Thursday morning on securities fraud related to a firm he founded.

Shkreli, 32, ignited a firestorm over drug prices in September and became a symbol of defiant greed. The federal case against him has nothing to do with pharmaceutical costs, however. Prosecutors in Brooklyn charged him with illegally taking stock from Retrophin Inc., a biotechnology firm he started in 2011, and using it to pay off debts from unrelated business dealings. He was later ousted from the company, where he’d been chief executive officer, and sued by its board.

In the case that closely tracks that suit, federal prosecutors accused Shkreli of engaging in a complicated shell game after his defunct hedge fund, MSMB Capital Management, lost millions. He is alleged to have made secret payoffs and set up sham consulting arrangements. A New York lawyer, Evan Greebel, was also arrested early Thursday. He's accused of conspiring with Shkreli in part of the scheme.

Retrophin replaced Shkreli as CEO “because of serious concerns about his conduct,” the company said in a statement. The company, which hasn’t been accused of any wrongdoing, has “fully cooperated with the government investigations into Mr. Shkreli.”

Shkreli’s lawyer declined to comment. Greebel, who worked at Katten Muchin Rosenman LLP and served as lead outside counsel to Retrophin from 2012 to 2014, helped Shkreli in several schemes, prosecutors said. A spokeswoman for Katten Muchin declined to comment; a spokeswoman for Kaye Scholer, where Greebel now works, said he joined the firm after the alleged activities occurred.

Authorities outlined years of investment losses and lies Shkreli allegedly told his investors almost from the moment he began managing money. By age 26, they said, he got nine investors to place $3 million with him, began losing their money and covering it up. Within a year, his fund's account was down to $331.

Shkreli attracted another $2.35 million investment in 2010 and lost about half of that in two months, the authorities said. As the hole grew, he covered it up with scheme after scheme, telling investors that his returns were as high as 35.8 percent when he was down 18 percent. He used client money to pay for his clothing, food and medical expenses and lied to the broker handling his fund's accounts, authorities said.

His name entered public consciousness after he raised the price more than 55-fold for Daraprim. It is the preferred treatment for a parasitic condition known as toxoplasmosis, which can be deadly for unborn babies and patients with compromised immune systems including those with HIV or cancer. His company, Turing Pharmaceuticals AG, bought the drug, moved it to a closed distribution system and instantly drove the price into the stratosphere.Shkreli’s extraordinary history—and current hold on the public imagination—makes the case more noteworthy than most involving securities fraud. The son of immigrants from Albania and Croatia who worked as janitors and raised him deep in working-class Brooklyn, Shkreli both epitomizes the American dream and sullies it. As a youth, he showed exceptional promise and independence and, after dropping out of an elite Manhattan high school, began his conquest of Wall Street before he was 20.

The moves drew shocked rebukes from Congress, public-interest groups, doctors and presidential candidates, and cast an unwelcome spotlight on the rising prices of older drugs. Donald Trump called Shkreli a “spoiled brat,” and the BBC dubbed him the “most hated man in America.” Bernie Sanders, a Democratic presidential candidate, rejected a $2,700 campaign donation from him, directing it to an HIV clinic. A spokesman said in October that the campaign would not keep money “from this poster boy for drug company greed.”

http://www.bloomberg.com/features/2015-martin-shkreli-securities-fraud/

CLICK HERE TO VIEW KBIO CLASS ACTION HOMEPAGE ON STEINMEYERLAW.COM - IF YOU ARE OR WERE A SHAREHOLDER WHO LOST IN KBIO JOIN CLASS ACTION LAWSUIT 

The Flaws In "Basic Income for Everyone"

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Proponents claim Basic Income can be paid by redirecting existing welfare programs, but a quick review reveals this as nonsense.

Finland made the news recently by proposing a pilot program of guaranteed income for all, also known as Universal Basic Income: Desperate Finland Set To Unleash Helicopter Money Drop To All Citizens.

The goal is two-fold: by providing every household with a minimum income, regardless of what other income the individuals might earn, the program does two things: it provides everyone enough money to get by and it removes the disincentive to work inherent in the conventional welfare model: in the current model, recipients who earn money lose their benefits, leaving them no better off if their earnings are modest.

The Finnish proposal offers a basic income of around $850 to $900 per month, roughly $10,000 per year.

Proponents of Universal Basic Income (UBI) see it as the only solution to automation's replacement of human labor, a topic I discuss in depth in my new book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.

Advocates of guaranteed income for all claim the program can be paid for by two mechanisms: taxing the owners of robots and software who are presumed to be banking enormous profits off automation and by cutting existing social welfare programs that Universal Basic Income replaces.

As podcast host KMO and I discuss in The Search for Scarcity, this proposed funding doesn't stand up to the most rudimentary analysis. Here's why:

1. Profits and payrolls both fall as automation replaces human labor. It's easy to understand why if we consider what happens to Company A's profits and payrolls when it replaces huge swaths of its labor force with robotics and software/AI.

Its head-count and payroll expenses immediately decline, of course, but so do its profits: as robots and software become cheaper, what's to stop Company A's global competitors from buying the same robots and software?

The reality is the tools of automation are commodities, rapidly falling in cost and available everywhere. The scarcity value of these tools is effectively near-zero, and as economist Michael Spence pointed out, profits and value only flow to what's scarce.

As Erik Brynjolfsson, Andrew McAfee, and Michael Spence explain in their 2014 article New World Order: Labor, Capital, and Ideas in the Power Law Economy, capital and labor have very little scarcity value: both are in over-supply. This is why capital earns effectively near-zero return, and why the value of conventional labor is declining.

Automation, capital, labor and everything that can be commoditized globally has near-zero scarcity value, and hence near-zero profitability. As automation eliminates jobs, it also slashes profits. rather than boost profits as Basic Income proponents anticipate, automation reduces profits along with payrolls.

Thus the more realistic projection is for record corporate profits to return to their historical average of around 5%-6% of GDP, which would mean profits falling from $1.9 trillion to $1 trillion.

So let's run some numbers. The federal government currently spends about $3.8 trillion and collects about $3.3 trillion in tax revenues; it borrows the difference ($500 billion) by selling Treasury bonds--in effect, borrowing from our grandchildren to fund our benefits today.

This is politically expedient, but morally and fiscally bankrupt.

State and local governments spend another $3.2 trillion source: U.S. Census Bureau. State and local governments collect tax revenues of $3 trillion and borrow the balance.

So government consumes about $7 trillion of the $17 trillion U.S. GDP, and already borrows at least $700 billion to fund these expenditures. (In recession, the deficit spending and borrowing quickly soars well above $1 trillion.)

Paying all 322 million Americans $10,000 a year would cost $3.22 trillion. Proponents claim this can be paid by redirecting existing welfare programs, but a quick review reveals this as nonsense.

All state and local government social welfare programs are around $500 billion, and programs such as food stamps (SNAP) that would presumably be replaced with Basic Income are relatively small budget items: SNAP is around $75 billion.

As for Social Security: those receiving around $850 per month in Social Security benefits won't mind their SSA benefit being replaced by Basic Income--they will receive the same amount. But those earning $1,500 in Social Security benefits will expect to receive $1,500, not $850.

The net result is the savings from swapping Social Security payments for Basic Income are also modest. The SSA distributes around $950 billion annually to about 69 million recipients. As a rough estimate, perhaps $500 billion could be swapped from SSA to Basic Income.

As for Medicaid and and Medicare, Basic Income does not include medical care. These programs will be untouched by Basic Income.

Bottom line, Universal Basic Income will add roughly $2.2 trillion to government spending, while profits and payrolls--the sources of tax revenues--will both decline.The only way to pay for another $2+ trillion in spending is to raise taxes or borrow it from our grandchildren--a proposal that is morally and fiscally bankrupt.

Raising $2 trillion more in addition to the current federal tax revenues of $3.3 trillion and state/local taxes of $3+ trillion is a tall order. If the economy enters a profit and payroll recession (from any of several potential causes, including automation, rampant financialization, global recession, financial crisis, etc.), tax revenues will crater. Who will pay all this additional tax?

Yes, those earning $150,000 or more will end up paying their Basic Income payment as additional taxes, but the number of high-earners (who already pay roughly 85% of all federal taxes) simply isn't large enough to skim another $2 trillion.

Even if every dollar of corporate profit was taken (not likely, given the lobbying power of corporations), that would still leave the Basic Income program $1 trillion short.

Who will pay all this additional tax? If we say the remaining employed, that leads to this question: if much of your wage is being levied to support people who don't work, what's the motivation for working at all? Why not join the work-free crowd?

And what happens when the most productive members of the workforce quit or decline to be productive? Robots can't do everything, despite lavish techno-claims to the contrary.

In sum, the psychology of punishing the productive and rewarding non-contributors is destructive to everyone. Have proponents forgotten that humans are prone to emotions such as resentment? Resentment goes both ways; the recipients of Basic Income will be getting by, but they won't be able to build capital or better their financial stake. They are in effect Basic Income Serfs.

Proponents also believe that the loss of work will free everyone getting a basic income to become an artist, composer, musician, etc. As I noted in "Super-Welfare" Guaranteed Income For All Isn't a Solution--It's Just the New Serfdom, Since meaningful work is the source of positive social roles, Hell is a lack of meaningful work.

In the myopic view of the Basic Income proponents, humans are nothing but consumer-bots who chew through the Earth's resources in their limitless quest for more of everything-- what the Keynesian Cargo Cult worships as "demand."

Tragically, this blindness to humanity's need for meaning and the elevation of spiritually empty consumerism to a Secular Religion leaves the basic Income crowd incapable of understanding this timeless truth: the only possible result of robbing people of their livelihood is despair.

Once meaningful work vanishes, so do positive social roles.

This is why guaranteed income for all is just a new version of Socioeconomic Hell. Being paid to do nothing does not provide meaningful work or positive social roles, which are the sources of positive identity, pride, purpose, community and meaning.

The petit-bourgeois fantasy of every individual flowering as an artist, musician and creator once freed of work is an abstraction, one born of the expansion of academic enclaves and private wealth-funded dilettantes fluttering from one salon to the next. (Ever notice how many trust-funders have therapists? Would they all need therapists if being freed from work automatically generated happiness and fulfillment?)

These are precisely what basic income for all doesn't provide. To the degree that serfdom is political powerlessness and near-zero access to the processes of accumulating productive capital, guaranteed income for all is simply serfdom institutionalized into a Hell devoid of purpose, pride, meaning, community and positive social roles.

This is why I say The Future Belongs to Work That Is Meaningful.

KMO and I discuss these topics and more in The Search for Scarcity. Come on, people--we can do better than the bankrupt serfdom of Basic Income.

*  *  *

http://www.zerohedge.com/news/2015-12-11/flaws-basic-income-everyone

US Equity Futures Suddenly Fall Off A Cliff As Europe Slides, Oil Tumbles, EM Currencies Turmoil

It was a relatively calm overnight session in which European stocks wobbled modestly, Japan was up, China was down following the Yuan's weakest fixing since 2011 as the PBOC continues to aggressively devalue since the SDR inclusion (stoking concerns capital outflows are once again surging), EM stocks stocks were weak and the dollar was unchanged ahead of today's retail sales data and next week's Fed meeting, and then suddenly everything snapped.

First it was oil, which after falling calmly all session suddenly hit an air pocket following the latest IEA report, in which the energy agency said global oil markets will remain oversupplied at least until the end of 2016 as demand growth slows and OPEC output booms, putting oil prices under further pressure, the International Energy Agency said on Friday.

The IEA said the global oil glut was set to worsen in the months to come as additional supplies from Iran - when and if Western sanctions on the country are removed - would push more oil into storage.

The immediate result: Brent slid below $39 for only the first time since 2008, while WTI is fast approaching the dreaded $35 handle. Ironically, several days ago when we noted that Brent and iron ore were both at $40 we said the two are racing each other to $0. Today, both Brent and Iron Ore hit $38. So far nobody is winning.

Almost at the same time EM currencies woke up to the threat of a USD rate hike next week, and proceeded to mini tantrum once more taking China's stealth devaluation lead, with the South African rand continuing its collapse from yesterday when in the aftermath of the sacking of the finance minister all local risk assets tumbled. Today, it's more of the same.

And then the weakness finally spread to US equity futures, which after doing what they do best for most of the overnight session, i.e., ignoring everything around them, suddenly fell off a cliff, dropping as much as 16 point in just a few minutes.

As a reminder, it was China's devaluation that launched the global market turmoil in August that ultimately forced the Fed to delay its September rate hike. If China wants to repeat this performance it has 2 days in which to do it.

For now, this is how global markets look like

• S&P 500 futures down 0.6% to 2029
• Stoxx 600 down 1.42% to 358
• MSCI Asia Pacific down 0.4% to 129
• US 10-yr yield down 1bp to 2.22%
• Dollar Index up 0.01% to 97.95
• WTI Crude futures down 0.9% to $36.44
• Brent Futures down 1.1% to $39.29
• Gold spot down 0.3% to $1,069
• Silver spot down 0.3% to $14.07

A closer look at the markets reveals that in the final session of the week, Asian equities shrugged of the positive lead from Wall Street to trade broadly in the red, as weakness in China dampened sentiment. As such, Asian stocks headed for the biggest weekly drop since Sept. Chinese shares slid after a report billionaire Guo Guangchang was missing added to concerns that slowing economic growth. Yuan recorded its biggest weekly drop since an August devaluation.

"Asian markets had a mixed day to end the week,” said Angus Nicholson, Melbourne-based market analyst at IG Ltd. “Japanese markets have clearly reached levels where investors are happy with valuations again. Chinese markets were spooked by the ‘disappearance’ of Fosun’s chairman, quite likely by China’s anti-corruption department.”

The Shanghai Comp (-0.7%) was weighed on by financials amid growing concerns over increased capital outflows, as the PBoC continued to depreciate the CNY fix to bridge the gap with the CNH. While Chinese stocks had also been spooked following reports that the Chairman of the nation's biggest non-state-owned conglomerate (Fosun), had disappeared, igniting probe speculations. ASX 200 (-0.2%) was dragged lower by materials as iron ore sustained its downward spiral having fallen 1.4% in the prior session. Nikkei 225 (+1.0%) bucked the trend with Japanese exporters benefitting from the weaker JPY. JGBs fell amid spill-over selling in T-notes despite the BoJ entering the market.

China's State-owned Asset Supervision and Administration (SASAC) said that SOEs which are unprofitable for 3 years should leave the market and that they will shut, suspend or reorganise long-term unprofitable SOEs in overcapacity industries which fail to adhere to environment, safety and quality standards. Also in China overnight we got New Yuan Loans data, which rose by CNY708.9B, below the Expected CNY735.0B.

Top Asian News

• Fosun Bonds Fall, Stock Halted After Report Chairman Missing: Caixin magazine reports Group has “lost contact” with billionaire Guo Guangchang
• China to Consolidate Shipping Operations at Two Top State Firms: China Ocean Shipping Group and China Shipping Group will consolidate operations
• Hong Kong on the Brink as Builders Offer Stealth Price Cuts: Cheung Kong, Henderson Land among developers offering inducements incl. stamp-tax rebates
• China Ghost Town Developer May Default on Bonds Next Week: Ordos City Huayan says bondholders chose to sell back 1.14b yuan ($176.7m) of bonds early
• Citigroup Trader Fired Over Currency Probe Sues in Singapore: Tian Yuhui was fired the day she returned to work after four-month maternity leave
• China Losing Appeal to World Just as It Opens Bond Market Wider: The two best reasons to buy Chinese bonds are fast fading
• Nobel Laureate Says IMF Move Won’t Propel Yuan to Rival Dollar: Yuan becoming reserve currency “mostly of symbolic value,” Maskin says

European stocks fall for 4th day, led by declines in financial services and autos, on track for a second weekly decline. Italian stocks underperform, Swiss bourse outperforms. "Although everyone is expecting a rate hike from the Fed next week, a lot of questions remain about the future of monetary policy,” Francois Savary, chief investment officer at Geneva-based investment management firm Prime Partners told Bloomberg. "You currently have one central bank in a tightening cycle, and the other can’t actually deliver on expectations. The ECB’s disappointment last week showed that Draghi’s hands are tied. That’s why investors are so unsettled now.’’

In terms of specific movers, Softness has been seen in Co.'s with exposure to South Africa, with the likes of Investec (-8.0%) and Old Mutual (-9.0%) underperforming amid the recent ZAR weakness.

Fixed income markets have moved in tandem with the risk off sentiment, with Bunds extending on recent trade, moving higher throughout the morning and heading towards the 159.00 level.

Top European News

• Standard Chartered’s $5.1b Share Sale Gets 97% Demand: New shares are scheduled to trade in Hong Kong on Dec. 16
• Barclays CEO Staley Said to Extend Hiring Freeze Into Early 2016: A previous ban, implemented by Chairman John McFarlane in Sept. until year-end, was due to be reviewed in Jan.
• Denmark Set to Raise Bond Target as Demand Soars, Liquidity Lags: Will probably try to sell as much as DKK100b ($15b) in bonds next yr, or about one-third more than implied in a previous forecast, according to Nordea and Sydbank
• Cameron Delays Heathrow Decision Until Mid-2016, Sparking Anger: Announcement put back until after London Mayoral election
• Bellway Says Still Trading Well, Well Placed for Volume Growth: Reservation rate rose 12% to 165 homes per week in 18-wk period
• Publicis Loses Media Account as L’Oreal Switches to WPP: Publicis earlier this week lost business with Procter & Gamble
• Cancer Drug Quest Drives Bayer to Accelerate Pipeline Investment: Bayer may have 5 cancer drugs on the market by 2020

FX markets have seen a continuation of recent trend of softness in EM and commodity currencies , with the likes of ZAR seeing further weakness in the wake of the finance minister being replaced earlier in the week, while the RUB continued to be impacted by soft energy prices ahead of their rate decision, whereby the Bank of Russia kept rates on hold but announced intentions to cut rates in the future. AUD has weakened in tandem with softness seen in CNY and the by downbeat data out of China as European participants arrived at their desks.

A week ago today saw OPEC choose not to lower their production output and the implications are still firmly being felt across markets, with energy complex extending on weakness during the European morning as Brent and WTI both hit fresh multi year lows, with the former firmly below USD 39.50 and the latter firmly below USD 36.50. Separately Gold continues to decline amid recovery in the USD, with prices on track for a 7th weekly loss within the past 2 months, as we move a step closer to the key Fed rate decision next week.

Looking ahead at the key US releases, today's highlights include US retail sales, PPI final demand and the preliminary reading of University of Michigan sentiment.

Top Global News

• IEA Sees Oil Glut Lasting Until Late 2016 as OPEC Keeps Pumping: Global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the IEA
• Dow Chemical, DuPont Said to Plan Friday Announcement of Merger: Still no guarantee that the terms of the transaction will be agreed by then, said people familiar with the matter
• Buffett’s BNSF Open to Bid for Norfolk to Challenge CP Offer: BNSF is open to making a competing bid for Norfolk Southern, the target of a $27b takeover effort by Canadian Pacific Railway
• Ford to Invest $4.5b in Electrified Vehicles by 2020: Will add 13 electric cars and hybrids by 2020, rising to 40% of its lineup from 13% now
• United Technologies Plans $1.5b Restructuring Program: Restructuring, including reducing the manufacturing footprint in the U.S. and Europe, will result in $900m of annual savings when it’s done, CEO said Thursday
• Adobe Profit Tops Analysts’ Estimates on Cloud Sales Gains: 4Q adj. EPS 62c vs est. 60c, reaffirms FY2016 rev. view ~$5.7b (Oct. 6), adj. EPS ~$2.70
• Yahoo SVP Fuloria Leaving Company as Talent Drain Continues: Fuloria, whose duties included product and engineering for advertising products, is moving on to work with entrepreneurs and early-stage companies
• Senate Passes Short-Term Bill to Avoid Government Shutdown: Would finance the govt. through Dec. 16, requires approval by the House, which plans to vote on it on Friday
• Paris Climate Talks Enter ‘Crunch Time’ With Deal Divisions: Trying to narrow options in the agreement text that range from the amount of global warming that should be tolerated to how countries should review efforts to reduce greenhouse gases
• Macau Casinos Fall on Report China to Crack Down on UnionPay Use: Fell in Hong Kong trading after the South China Morning Post reported China will introduce new measures to crack down on the use of illegal China UnionPay point of service device
• Global Payments Said to Be in Talks to Buy Heartland Payment: A deal could be announced as soon as this month
• All Developed Bond Markets Gain in 2015 in Face of Fed Rate Move
• Chipotle Restaurant Shut Down in Seattle, Adding to Its Woes

Bulletin Headline Summary from RanSquawk and Bloomberg

• EM and commodity linked currencies are in focus amid softness in energy prices and global growth concerns as China remains in the spotlight
• European equities follow their Asian counterpart's lead to trade firmly in the red, with Bunds benefitting from the downbeat sentiment
• Looking ahead, today's highlights include US retail sales, PPI final demand and preliminary reading of University of Michigan sentiment as well as comments from BoE's Weale
• Treasuries rise amid losses in global equities led by EM and commodities before next week’s FOMC meeting; China’s yuan was on course for the steepest weekly drop since its August devaluation.
• The global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the IEA
• Fosun International Ltd. bonds plunged by a record and the company suspended its shares in Hong Kong after Caixin magazine reported that billionaire Chairman Guo Guangchang had gone missing
• The baffling disappearance of Chinese executives in recent weeks has drawn attention to the ruling Communist Party’s practice of holding people incommunicado either as targets of investigations themselves or to help with probes of others
• Ukraine may need to step up efforts to resolve a standoff with Russia over a $3b bond due this month to keep receiving aid from the IMF
• Less than 24 hours after South Africa President Jacob Zuma sent markets into chaos by abruptly firing his finance minister and replacing him with an untested unknown, fund managers and analysts warned that the ANC’s reputation for prudent financial management was practically in tatters
• The strong showing for Marine Le Pen’s National Front in the first round of France’s regional elections risks undermining her bid for a repeat in the second as a slew of polls suggest she may not be able to rally enough support to win major executive power for the first time in Sunday’s run-off
• Sovereign 10Y bond yields mixed. Asian stocks lower, European stocks fall, U.S. equity-index futures decline. Crude oil slides, copper rallies, gold drops

US Event Calendar

• 8:30am: Retail Sales Advance m/m, Nov., est. 0.3% (prior 0.1%)
  • NOTE: U.S. Retail Sales Seen Having Edged Higher in Nov.
  • Retail Sales Ex Auto m/m, Nov., est. 0.3% (prior 0.2%)
  • Retail Sales Ex Auto and Gas, Nov., est. 0.4% (prior 0.3%)
  • Retail Sales Control Group, Nov., est. 0.4% (prior 0.2%)
• 8:30am: PPI Final Demand m/m, Nov., est. 0% (prior -0.4%)
  • NOTE: U.S. PPI Remains Depressed Ahead of Fed Liftoff
  • PPI Ex Food and Energy m/m, Nov., est. 0.1% (prior -0.3%)
  • PPI Ex Food, Energy, Trade m/m, Nov., est. 0.1% (prior -0.1%)
  • PPI Final Demand y/y, Nov., est. -1.4% (prior -1.6%)
  • PPI Ex Food and Energy y/y, Nov., est. 0.2% (prior 0.1%)
  • PPI Ex Food, Energy, Trade y/y, Nov. (prior 0.4%)
• 10:00am: Business Inventories, Oct., est. 0.1% (prior 0.3%)
• 10:00am: U. of Mich. Sentiment, Dec. P, est. 92 (prior 91.3)
  • U. of Mich. Current Conditions, Dec. P (prior 104.3)
  • U. of Mich. Expectations, Dec. P (prior 82.9)
  • U. of Mich. 1 Yr Inflation, Dec. P (prior 2.7%)
  • U. of Mich. 5-10 Yr Inflation, Dec. P (prior 2.6%)

DB's Jim Reid concludes the overnight wrap

Presents for investors remain few and far between and there is still no sign of a anta laus rally although the S&P 500 did climb nearly 1% on the day 90 minutes before the close before slipping to end the day only +0.23% higher. Having shrugged off most of what was another down day for Oil, it appears that the index finally succumbed to one last dip lower for WTI into the close which dragged down energy stocks, the sector closing still with a +0.62% gain but at one stage was up over +1.5%. A fifth-consecutive day of near seven-year lows was made for WTI after it finished down -1.08% at $36.76, the latest fall not helped by OPEC reporting that November crude production was the highest in three years. Brent closed below $40 for the first time in this recent sell-off. That OPEC meeting last Friday feels like a long time ago, with prices now 13% down from the pre-meeting highs that day.

Some of the more interesting newsflow yesterday in the energy sector was at the micro level. Contributing to the early bounce for the sector were announcements from Chevron and ConocoPhillips with both energy heavyweights signaling that they intend to cut capex by a further 25% next year – the latter also expecting to sell down some non-core assets. It wasn’t just the US names in focus as Glencore was out with some cutback measures of its own, specifically targeting deeper debt reductions, more capex reductions and further divestments. Those measures sent Glencore’s share price up 7% yesterday, while its 10 year maturity bonds closed some 4pts higher. There was less good news for Anglo American however. Fresh off the back of its investor day earlier this week in which the company detailed out its own set of bumper measures, Moody’s downgraded the miner one notch to Baa3 late last night. The move puts it in-line with &P, however Moody’s also kept Anglo on review for further downgrade, raising the possibility of the company being downgraded to HY.

Credit markets were under pressure yesterday on both sides of the pond. In Europe Crossover (+5bps) closed wider for the fourth consecutive day, while in the US and despite the slightly better performance for US equities, CDX IG finished nearly 2bps wider on the day. Meanwhile, catching our eye, the WSJ was out with a story last night reporting that a large HY mutual fund in the US is blocking clients from withdrawing their money and is instead seeking an orderly liquidation. According to the article, the moves come after a number of redemption requests within the fund and also difficult liquidity conditions. Notably, the fund is sizeable with $789m in assets, although that is down from $2.4bn earlier in the year. In the first six days of this month, over $120m was said to have been withdrawn from the fund alone. A warning sign in an asset class under a fair bit of stress at the moment given these latest moves in energy prices. Speaking of which, US HY energy spreads were actually 1.5bps tighter yesterday, snapping a five-day run where spreads widened 126bps.

Moving on, it’s been a reasonably quiet week for data in the U this week, although today will see the November retail sales released where expectations are currently running for a +0.3% mom gain in the headline and +0.4% gains for the ex auto and ex auto & gas prints. Our US economists are a little less optimistic and are forecasting an unchanged reading at the headline and +0.2% and +0.3% gains for the two respective core readings. More important in their view however is the core retail control figure. This is the core print which excludes autos, gas and building materials and is the component used to estimate goods spending in the GDP accounting. Market expectations for this is a +0.4% mom gain.

Before we get there though, aside from a gain for the Nikkei (+1.00%) this morning, it looks like the bulk of bourses in Asia are to set to close out the week on a down note. Indeed the Shanghai Comp is down -0.72% while there are falls also for the Hang Seng (-0.76%), Kospi (-0.34%) and ASX (-0.16%) – the latter seeing resources names under pressure. Oil markets are down around half a percent while credit indices in Asia and Australia have both widened a couple of basis points.

Staying in Europe, equity markets continued their slide as yesterday the Stoxx 600 finished the session -0.27%, marking the 7th time in the last 8 sessions that the index has closed lower. Some of this may have reflected comments from the E B’s Praet who, commenting on the reaction post the E B meeting last week, said that ‘the markets exaggerated the situation’ and that ‘there was speculation about a package of measures that had never been up for Data in Europe yesterday was firstly centered in France where we saw the November inflation print come in softer than expected (-0.2% mom vs. 0.0% expected), which dragged down the YoY rate by one-tenth to 0.0%. French Industrial production (+0.5% mom vs. 0.0% expected) was significantly better than expected, although this was offset by a soft manufacturing production print (-0.5% mom vs. +0.1% expected). In the UK the BoE left rates on hold as expected by a vote of 8-1 with Ian McCafferty the lone dissenter after again arguing for a 25bps hike. The minutes revealed not much change in view relative to the November inflation report, while it was acknowledged that there ‘was no mechanical link’ between UK policy and policy of other central banks.

In the US yesterday we saw initial jobless claims tick up by 13k last week to 282k (vs. 270k expected) which was a five month high although this was blamed on seasonality more than anything else. Meanwhile the November import price index fell by less than expected last month at -0.4% mom (vs. -0.8% expected).

Turning over to the day ahead, this morning in Germany we’ll get the final reading for November CPI where no change is expected from the early +0.1% mom flash. In the UK the latest construction output numbers are due. Over in the US this afternoon the main focus will be on the retail sales data, although it’s also worth keeping a close eye on the November PPI print, particular the details on the healthcare industries series which is used to construct the healthcare services component of the core PCE deflator. Elsewhere, business inventories data for October and the preliminary University of Michigan consumer sentiment print for December are due out.

Finally, while preparations for the holiday season will likely be on a lot of our readers’ agendas for the weekend, it’s worth keeping an eye on the next slug of China data due out tomorrow morning with the November retail sales, industrial production and fixed asset investment readings all expected. This will likely dominate the opening on Monday morning as we start a week that's likely to see the first Fed hike for 9 years!

http://www.zerohedge.com/news/2015-12-11/us-equity-futures-suddenly-fall-cliff-europe-slides-oil-tumbles-em-currencies-turmoi

Ruble Rebound Puts Currency Out of Touch With Oil Before Rates

The ruble gained for a third day, sparking concern the currency is overvalued relative to the price of oil and threatening government efforts to cover its budget.

The exchange rate, which has fallen 6.3 percent in the past month, strengthened 0.6 percent per dollar to 68.9300 by 6:28 p.m. in Moscow. Brent crude, the benchmark for the country’s main export blend, fell 0.7 percent to $39.83.

The price of Brent crude in local currency terms declined Thursday to a five-year low, a day before the Bank of Russia meets to discuss monetary policy. The low price Russia gets for oil puts a strain on budget revenue at a time the government is struggling to contain its biggest budget deficit in five years.

“The ruble seems to be ignoring oil,” said Alexei Egorov, an analyst at PAO Promsvyazbank in Moscow. “Despite the fact that the oil price is hitting new lows, there’s low demand for dollars among people and companies." Egorov predicted the central bank will hold its key rate at 11 percent because it doesn’t want to risk stoking inflation.

Rate Forecast

Policy makers will probably leave rates on hold at 11 percent on Friday for a third consecutive meeting, according to the median of 34 estimates in a Bloomberg survey. Forward-rate agreements signaled 40 basis points of key rate cuts in the next three months, the smallest reading since October. Even leaving rates unchanged will have only a limited effect on the ruble, Egorov said.

“Of course, such a combination of oil and ruble is inconvenient for the budget,” Yury Tulinov, the head of research at Societe Generale’s Rosbank PJSC unit in Moscow, said by e-mail. “Traders are waiting for oil prices to recover and don’t want to sell the ruble."

A weaker ruble risks stoking inflation, while a stronger currency may threaten competitiveness and hurt budget revenue that’s dependent on the price of oil and the ruble. Brent in rubles dropped 1 percent to 2,755 rubles, trading below the 3,284 average for the past 12 months.

Brent crude stabilizing around $40 and unchanged rates should prevent the ruble from weakening past 70 per dollar, according to Piotr Matys, a strategist for emerging-market currencies at Rabobank.

“We expect the Bank of Russia to keep rates unchanged,” said Matys. “Such a decision should provide the ruble with some support, but it will not prove sufficient if Brent crude starts leaning lower."

The benchmark Micex Index of stocks rose 0.1 percent to 1,735.41, with Lukoil PJSC gaining 2.2 percent. Market Vectors Russia ETF had outflows of $6.2 million on Dec. 9, according to data compiled by Bloomberg. The yield on Russia’s five-year government bond was little changed at 10.14 percent.

http://www.bloomberg.com/news/articles/2015-12-10/ruble-gains-with-oil-as-central-bank-seen-leaving-rate-unchanged