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By Tyler Durden

When previewing the key events of the week, we noted that today Canadian DBRS rating agency is scheduled to review Italy’s credit rating after putting its credit worthiness on negative watch on 5 August. On 5 December, DBRS issued a press release declaring that they would wait for the impact of the Italian referendum result on the continuation of the reform push before making the final decision.

In case of a downgrade, the haircut for a 5y BTP used as collateral for ECB operations, as an example, would rise from 2% to 10%.

Moments ago DBRS did just that when it downgraded italy from A (low) to BBB (high), stripping the sovereign of its final A credit rating.

The rating agency cited “a deterioration in the “Monetary Policy and Financial Stability” and the “Political Environment” sections were the key factors in the downgrade. The Stable trend reflects DBRS’s view that Italy’s challenges are commensurate with the BBB (high) ratings and are balanced by the country’s strong commitment to fiscal consolidation and evidence of some, albeit very modest, economic recovery.”

It also warned that “if weaker political commitment to fiscal consolidation and the reform agenda or a significant downward revision to growth prospects were to materialize, further delaying a steady decline in the public debt-to-GDP ratio, this weakening could lead to a Negative trend.”

The new interim government, although supported to some extent by the same majority as the Renzi government, may have less room to make progress with growth-enhancing measures, as it was formed with the main aim of facilitating parliamentary discussion on the electoral law before political elections scheduled to be held in 2018. Furthermore, the risk of an early election remains, especially after a decision is made by the Constitutional Court on the electoral law, expected in late January 2017. This decision could affect the duration of Prime Minister Gentiloni’s cabinet. Political parties could immediately put more pressure for snap elections in the first half of 2017, using the electoral law produced by the decision of the Court. This pressure would be expected to capitalise on the result obtained in the referendum in December 2016.

However, there is also a lack of clarity over the timing of elections. DBRS considers that the next election is unlikely to be held before Autumn 2017, as the parliamentary discussions on the electoral law are likely to take time. DBRS also considers that the next electoral law is likely to have a higher proportional characteristic, increasing the chances of having a coalition government of mainstream parties and lowering the electoral chances of Euro-sceptic parties. Nevertheless, support for the opposition parties could increase if economic conditions were to not improve, especially for the young and the long-term unemployed.

According to a separate estimate from Rabobank, the haircut on Italian bonds imposed by the ECB would rise from 1.5% to 9%, and lenders would need to post €6.7 billion more in government debt to access the same levels of loans. Cited by the FT, Richard McGuire at …read more

Source: DBRS Downgrades Italy, Stripping It Of Its Last "A Rating" And Raising ECB Collateral Haircuts

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By Tyler Durden

Well that’s not supposed to happen…

…read more

Source: Banks Are Dumping – JPMorgan Goes Red

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By Tyler Durden

n the last days of the Obama administration, the outgoing president has taken on a surprising urgency in closing “open” cases of alleged fraud, if mostly involving foreign carmakers. Case in point, this week’s $4.3 billion settlement with Volkswagen to put the diesel emmisions scandal to rest, and yesterday’s unexpected accusation by the EPA that Fiat was likely engaging in a similar scheme to defraud the US government of its true emissions. The crackdown has led to various curious outcomes, the most surprising of which is that Volkswagen has warned its senior managers not to travel to the United States after six current and former managers were indicted for their role in the German carmaker’s diesel test-cheating scheme, according to Reuters.

The company agreed to pay $4.3 billion in civil and criminal fines in a settlement with the DoJ on Wednesday, the largest ever U.S. penalty levied on an automaker. However, Attorney General Loretta Lynch said the DoJ would continue to pursue “the individuals responsible for orchestrating this damaging conspiracy”.

As reported on Monday, one of the six charged, Oliver Schmidt, was arrested by the FBI at Miami International Airport on Saturday as he was about to fly home from holiday in Cuba. Schmidt, who is caught up in the “Dieselgate” investigation by the U.S. Department of Justice (DoJ), was ordered to be charged and held without bail on Thursday pending trial.

While the biggest German carmaker agreed to pay $4.3 billion in civil and criminal fines in a settlement with the DoJ on Wednesday, the largest ever U.S. penalty levied on an automaker, Attorney General Loretta Lynch said the DoJ would continue to pursue “the individuals responsible for orchestrating this damaging conspiracy”.

Hence, guilty until proven innocent. Incidentally similar “advice” was given to Swiss bankers in the years following Obama’s crackdown on Swiss banking secrecy, when all local bankers could be arrested on sight if they attempted to enter the US.

Which also explains the travel ban: under German’s constituion, citizens can be extradited only to other European Union countries or to an international court. But leaving Germany at all could pose a risk of being extradited to the United States from a third country. “Several Volkswagen managers have been advised not to travel to the United States,” one legal adviser to Volkswagen said on condition of anonymity because the matter is confidential.

A second legal adviser said this also applied to managers who had not yet been charged with any offense in the United States. “One doesn’t need to test the limits,” the adviser said.

Schmidt was among those who had been warned by lawyers working for the company not to travel to the United States, one of the legal sources said.

Meanwhile, the German Federal Criminal Police Office said it was not aware of any request to extradite the other five indicted VW managers.

Confirming that the German carmaker, which exmploys more than 600,000 workers, is taking the advice seriously, Reuters reports that only one board member traveled to this …read more

Source: Volkswagen Tells Its Managers Not To Travel To The US

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By Tyler Durden

After surging to 12-year highs in December, following Trump's election victory, UMich consumer sentiment faded in January and missed expectations (98.1 vs 98.5 exp). While inflation outlooks picked up modestly off record lows, economic 'expectations' – hope – dipped from 89.5 to 88.9 as the Trump Bump appears to have stalled.

While not quite as big a drop as Bloomberg confidence data, it appears Trumphoria is fading…

Even as inflation outlooks bounce off record lows…

On the bright side, survey respondents improved their view of it “being a good time to buy” Household Items, Homes, and Vehicles.

…read more

Source: Consumer Confidence Disappoints As Trump Hope Dips

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The International Labor Organization says the number of people out of work will hit a new record. …read more

Source: Global unemployment to hit new record high in 2017

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By Tyler Durden

In a report that was somewhat similar to that of Bank of America, JPM reported Q4 revenues of $23.4 billion, beating estimates of $23.1 billion, on EPS of $1.71, far higher than the expected $1.42, which however like in the case of BofA was due to a cut in expenses, which came in at $6.87 billion, far below the $7.2 billion, suggesting even greater expense – i.e. compensation – reductions.

While JPM’s net Interest Income was up $553mm YoY and up $163mm QoQ, this happened even as NIM declined by 2bps QoQ. That said, like BofA, JPM said it expects firmwide net interest income to be up “modestly” QoQ.

On the key, trading side, JPM reported that while investment banking revenue rose by $17mm Y/Y to $1.49 billion, it missed expectations of $1.59bn, and while FICC of $3.37 billion rose by $795 million, beating expectations of $3.26 bn, equity markets revenue of $1.15 billion came in weaker than the $1.29 billion expected.

Some details from the report:

• IB revenue of $1.5B, up 1% YoY, driven by higher debt underwriting fees, largely offset by lower advisory and equity underwriting fees
• Fixed Income Markets of $3.4B, up 31% YoY, driven by strong performance across products
• Equity Markets revenue of $1.2B, up 8% YoY, driven by strong performance in derivatives

The better than expected net income in the investment bankin group was mostly the result of a big drop in expense of $4.2B, which was down 6% YoY, driven by lower compensation and lower legal expense.

Another highlight: net charge offs in the bank’s credit card services group jumped from $838 million to $914 million, the highest since Q2 2013.

Finally, JPM’s loan loss reserves of 13.8B rose $0.2B from $13.6B in the prior year.

Full presentation below:

…read more

Source: JPM Earnings Jump On Slashed Expenses, Bond Trading Beats As Equity, IB Misses; Credit Card Charge-Offs Spike

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By Tyler Durden

Yesterday we sarcastically noted “they are all at it” when Fiat Chrysler was slammed by the EPA for emissions cheating, and now get further confirmation of the farce as The FT reports, French authorities have started a preliminary investigation into Renault amid suspicion the company may have “cheated” to conceal abnormal emissions of pollutants from some of its diesel engines.

The government commission’s report over the summer found that nitrogen oxide emissions for many Renault models went well beyond their official limit under “normal” driving conditions, by a factor of more than 10 in the case of some models.

Renault share tumbled on the headlines…

As The FT details, the decision, made on Thursday, comes after France’s independent anti-fraud authority referred the carmaker to state prosecutors in November, after completing its own investigation.

Three judges were appointed to lead the investigation, the Paris prosecutor said in a text message, into whether they “made merchandise dangerous for human health.”

Last year, three Renault sites in France were raided by authorities as part of a sprawling national investigation linked to the Volkswagen emissions scandal, sparking fears that the emission-rigging case was spreading across Europe.

The French government, which owns 20 per cent of Renault, and the carmaker has denied using software to cheat emission testing, saying its models “conformed to the laws and norms in each market where they are sold.”

…read more

Source: Renault Shares Tumble After Anti-Fraud Authority Accusations Of "Cheating" On Emissions Tests

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By Tyler Durden

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Welcome to “everyone I disagree with works for Putin,” the UK version.

UK Labour leader Jeremy Corbyn sits on the polar opposite of the political spectrum in most respects from U.S. President elect Donald Trump, yet they are both being accused of the same blasphemy — wanting peace with Russia. Here’s what I’m talking about, from The Independent:

In an interview with BBC Wales today, Mr Corbyn said it was “unfortunate that troops have gone up to the border on both sides”.

He added: “I don’t want to see any more troops deployed on the borders between Nato and Russia, I want to see a de-escalation, ultimately a de-militarisation and better relationships between both sides of it... there cannot be a return to a Cold War mentality.”

This is precisely the sort of sober commentary I’d want to hear from an elected leader at such an unnecessarily charged and dangerous moment, yet Mr. Corbyn was attacked for it in a manner quite familiar to us Americans…

The Conservative Armed Forces Minister Mike Penning has accused Jeremy Corbyn of “collaborating with Russia” in response to comments that British troops about to be deployed to Estonia were there to “escalate tensions” between Russia and NATO.

Mr Penning said the comments made on Wednesday by a spokesperson for Mr Corbyn showed that Labour “cannot be trusted with Britain’s national security”.

Mr Penning said: “Britain has Nato’s second biggest defence budget and plays a leading role in the alliance. It is unprecedented for a leader of the opposition to attack the defensive deployment of British troops in Nato territory.

“These comments suggest that the Labour leader would rather collaborate with Russian aggression than mutually support Britain’s Nato allies. As with Trident, everything Labour says and does shows that they cannot be trusted with Britain’s national security.”

The fact that Jeremy Corbyn is being attacked in exactly the same manner as Donald Trump tells us all we need to know. Namely, that if you disagree with the neocon/neoliberal establishment’s foreign policy, this makes you an agent of Vladimir Putin. Absurd and childish? Certainly, but that’s what they’re going with. Which is extremely important to recognize.

Those of us opposed to a continued insane push for more imperial overseas militarism must understand this isn’t a partisan issue. There is an entrenched establishment in power, and they laugh at Republican/Democrat or Conservative/Labour distinctions. These people are totally united in their thirst for confrontation with Russia.

Ok, fine, so what do we do about it? The reason I’m pointing all of this out is to stress the importance of unity. I see too much ego strutting and preening in the alternative media world today. Too many people who seem more focused on their own fame and status, and appear too preoccupied with picking stupid fights with others to see the bigger picture of what’s really at stake. The time for pettiness is over, the time for unity has arrived.

We need to isolate the big issues …read more

Source: UK Labour Leader Jeremy Corbyn Accused Of "Collaborating With Russia" For Wanting Peace

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By Tyler Durden

Submitted by Michael Shedlock via MishTalk.com,

A pair of articles by the Financial Times offers quite the take on disinformation hypocrisy.

I suggest the Financial Times look into the mirror if it wants to understand where the problem is.

Worse yet, to stop the spread of fake news, the FT editorial board wants restrictions on freedom of speech.

Yesterday, in The Threat Posed by Putin’s Cyber Warriors the FT was so worried about “disinformation” that it proposed restrictions on freedom of speech.

“The Russian state is far from alone in using hacking as a form of espionage. What distinguishes Moscow’s activity is the malicious way it appears to be using the information garnered and disseminating fake news to further pollute the political atmosphere. The timing of leaks during the US election looked calculated to weaken Hillary Clinton, the Democratic candidate,” claims the FT editorial view.

After railing against “fake news” the editorial view went on to propose restrictions on free speech.

“Berlin is considering imposing hefty fines on media outlets that spread false and malicious information. This may seem an undue restriction to freedom of speech but in the context of a propaganda war designed to undermine western democracy, it may be necessary to do more than enforce existing laws on libel and incitement.”

FT Purveyors of Fake News

That was yesterday. Today, the Financial Times spread fake news. Please consider Trump blasts US intelligence on Russia dossier.

Actually it’s the subtitle I want you to consider.

The subtitle “President-elect acknowledges Moscow hacked election” is a blatant lie.

Trump did not admit Moscow hacked the “election”.

Let’s consult the press conference transcript.

As far as hacking, I think it was Russia. But I think we also get hacked by other countries and other people. And I — I can say that you know when — when we lost 22 million names and everything else that was hacked recently, they didn’t make a big deal out of that. That was something that was extraordinary. That was probably China.

But remember this: We talk about the hacking and hacking’s bad and it shouldn’t be done. But look at the things that were hacked, look at what was learned from that hacking.

That Hillary Clinton got the questions to the debate and didn’t report it?

Key Differences

Trump never said Russia hacked the “election”. He did not even say Russia hacked anything. He said he “thinks” Russia hacked [the DNC].

1. Hacking the “DNC” is not quite the same as hacking the “election”.
2. “Think they did” is not the same as “did”.

The Financial Times should know the difference, especially in this heated environment.

By the way, the DNC was “hacked” by anyone. Someone at the DNC exposed their password in a phishing expedition.

And now we have Democrat Senators all wanting an investigation into a proven bogus dossier given to the FBI by Senator McCain.

To top it off, the FT wants to restrict freedom of speech to prevent the spread of fake news.

Who is to be the judge of fake news?

If the FT editorial board has an …read more

Source: Financial Times Editorial Seeks Restrictions On Free Speech To Stop False News "Propaganda War"

    

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