Trump: “Military Solutions Are Now Fully In Place, Locked And Loaded”

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Confirming yesterday’s report that the Pentagon is now prepared for a "preemptive strike", or response to any provocative action by North Korea, moments ago president Trump took the verbal war of words with Kim Jong-Un into the fourth day when he tweeted that "military solutions are now fully in place,locked and loaded,should North Korea act unwisely.  Hopefully Kim Jong Un will find another path!"

Earlier on Friday, the North Korean government’s official newspaper said that the US mainland could be “reduced to ashes at any moment” as tensions between the two countries continue to mount. The Rodong Sinmun, an official mouthpiece of Kim Jong-un’s ruling Workers’ Party, said the “reckless and hysteric” behavior of Donald Trump would be to blame if the US is attacked.

The Trump administration has been “seized with anxiety and terror” following North Korea’s successful testing of a long-range missile, the newspaper claimed, saying “US military warmongers are running amok”.

“It is a tragedy that the reckless and hysteric behaviors may reduce the US mainland to ashes [at] any moment,” it continued, according to KCNAWatch.

Ominously, the newspaper also said that it was the “steadfast will” of North Korea to “put an end to the hostile moves of the US” and vowed that the communist state will “win the final victory in the stand-off with imperialism and the US”. “The US and its vassal forces will dearly pay for the harshest sanctions and pressure and reckless military provocations against the DPRK,” it added.

As a reminder, on Thursday NBC reported the Pentagon yesterday unveiled a plan for a preemptive strike on North Korean missile sites with bombers stationed in Guam, once Donald Trump gives the order to strike. Echoing what we said yesterday that war "under any analysis, is insanity", the preemptive strike plan is viewed as the "best option available" out of all the bad ones: "There is no good option," a senior intelligence official involved in North Korean planning told NBC News, but a unilateral American bomber strike not supported by any assets in the South constitutes "the best of a lot of bad options."

The attack would consist of B-1 Lancer heavy bombers located on Andersen Air Force Base in Guam, a senior acting and retired military officials told NBC news.

“Of all the military options … [President Donald Trump] could consider, this would be one of the two or three that would at least have the possibility of not escalating the situation,” retired Admiral James Stavridis, former Supreme Allied Commander Europe and an NBC News analyst, said.

Separately, Defense Secretary James Mattis said military strategists at the Pentagon have a military solution in place to address the growing threat emanating from North Korea, but they are holding their fire in favor of ongoing diplomatic efforts. The Pentagon chief said any military option would be a multilateral one involving a number of regional powers in the Pacific. “Do I have military options? Of course, I do. That’s my responsibility, to have those. And we work very closely with allies to ensure that this is not unilateral either … and of course there’s a military solution,” Mattis told reporters en route to meet with senior leaders in the technology sector in Seattle and California.

However, as the Washington Times reports, Mattis reiterated that the administration’s diplomatic efforts to quell tensions on the peninsula remained the top priority for the White House.

“We want to use diplomacy. That’s where we’ve been, that’s where we are right now. and that’s where we hope to remain. But at the same time, our defenses are robust” and ready to take on any threat posed by the North Korean regime, Mattis said.

Unfortunately with every passing day that see rising verbal escalation – and now that China has explicitly warned the US not to strike first – the possibility of a diplomatic resolution grows increasingly more unlikely.

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Police have broken up an alleged cryptocurrency ‘boiler room’ in London

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bitcoin

LONDON — City of London Police have arrested a man suspected of setting up a "boiler room" to sell fake cryptocurrency to investors.

The Financial Times reports that a man was arrested on Wednesday at his home on suspicion of conspiracy to defraud and money laundering.

"The man is thought to be part of a group which allegedly set-up a ‘boiler room’ on Old Broad Street (EC2) which has allegedly been used to persuade people to invest in a cryptocurrency," the FT quotes the police as saying.

"Victims were cold called by salespeople who allegedly persuaded them to invest in a crypto currency which does not exist and is therefore worthless."

Business Insider has contacted City of London Police to confirm the story but they had not replied at the time of publication.

Cryptocurrencies have boomed in popularity this year, with many startups issuing their own digital currencies as a way of raising money. Businesses have raised over $1 billion through so-called "Initial Coin Offerings" so far this year and there are over 800 "altcoins" in circulation online, according to Goldman Sachs.

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NOW WATCH: Apple is lagging the market as iPhone 8 woes mount

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Global Market Rout Spreads Amid N.Korea Fears: VIX Keeps Rising As China Stocks, Currency Plunge

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The global rout resulting from tensions over the North Korean nuclear standoff continued on Friday following a third day of escalating verbal exchanges between Trump and Kim, with European and Asian shares tumbling as volatility across the globe spiked, with the selloff in US futures continuing albeit at a more modest pace. In addition to North Korea, attention will be focused on today’s US CPI print, which could result in even more currency volatility, should it surprise significantly in either direction.

All eyes remained on the sharp short squeeze in the VIX, which exploded above 16 on Thursday from single digits the day before – the highest print since Trump’s election victory – and extended gains on Friday rising 4% to 16.74, after briefly topping 17, a potential "margin calling" nightmare for countless vol sellers over the past year. Thursday also saw the highest VIX volume day on record as 937K VIX futures traded across the curve. The Global Financial Stress Indicator surged positive after trading in negative territory since April.

The global rout that sent the Nasdaq lower by 2% on Thursday, spread to China which saw the Shanghai Composite tumble by 1.6% to 3,208, its biggest drop this year, led by mining and resource stocks, with nearly 20 names halted limit down, after Chinese metals prices tumbled by 5%.

While there wasn’t a specific catalyst for the rout, a driver for the sharp commodity selling was the announcement by the China Steel Industry Association which said the recent surge in steel futures was not due to market demand but misunderstanding by some institutions. Adding fuel to the fire was a Reuters report that the Shanghai Futures Exchange told its members it may raise margins on steel rebar contracts if market trade volume is too large. As a result, metals also led declines on the mainland CSI 300 Index: Xiamen Tungsten slides as much as 9.3%, most intraday since September; Jiangxi Copper falls as much as 8.3%; China Molybdenum slips as much as 7.7%; the Bloomberg China Steel Producers Valuation Peers Index tumbled 5.9%, with Nanjing Iron & Steel, Maanshan Iron & Steel, Angang Steel dropping at least 6.9%.

"Chinese investors locked in profits on commodity shares following strong gains which had been driven by bets that capacity cuts would boost prices", said Helen Lau, Hong Kong-based analyst with Argonaut Securities. "Stock markets are in a risk-off mode due to escalating geopolitical risks, so recent outperformers would be the first to take a hit amid a selloff."  In HK trading Aluminum Corp. of China tumbles as much as 7.4%, the biggest intraday drop since February 2016, while China Shenhua Energy dropped as much as 4.8%, among the worst performers on Hang Seng Index.

Also hurting Chinese sentment was the plunge in Tencent, with the Chinese tech giant dropping as much as 5% in Hong Kong, its biggest intraday decline in more than a month, following news of a Chinese probe into Tencent, Sina and Baidu for cyber-security law violations.  Stocks of related tech companies were all lower with Sina down 3%, Weibo down 4.5%, and Baidu down 2.5%.

Earlier in the session, the onshore Chinese yuan dropped as much as 0.43% vs USD to 6.7080, its biggest drop since Jan. 19, after the PBOC set the fixing at a weaker level than expected. As Bloomberg reported overnight, the PBOC strengthened fixing by 0.19% to 6.66420, compared with forecasts of 6.6477 from Commerzbank, 6.6552 from Mizuho Bank, 6.6559 from Scotiabank and 6.6549 from Nomura. At the same time, the offshore yuan dropped as much as 0.28% to 6.6853, most since June 26, although putting the drop in context, just one day earlier, the CNY rose to its strongest level since August 2016 on Thursday, prompting Bloomberg to call the Yuan the new "safe haven" currency.

Elsewhere in Asia, Australia’s S&P/ASX 200 Index fell 1.2 percent at the close in Sydney. The Hang Seng Index in Hong Kong tumbled 2 percent and China’s Shanghai Composite Index was down 1.6 percent. South Korea’s Kospi index lost 1.7 percent and volatility on the Kospi 200 surged as much as 27 percent. The Japanese yen rose 0.2 percent to 108.96 per dollar, the strongest in more than 15 weeks. Japanese markets are closed for the Mountain Day public holiday.

European markets continued sliding into risk-off mode although at a slower pace; even so Europe’s where regional indices were set for the worst week of losses this year as sentiment on ongoing fears about escalation between the US and North Korea. Weakness has been seen across the board (Eurostoxx 600 -1.0%), however mining names have notably underperforming amid Chinese metal prices slumping by some 5% overnight. The iTraxx Crossover extended its recent widening, leading sentiment as hedges are placed into the weekend. European equity markets opened lower led by mining sector, as base metals sell off heavily in Asia after a report saying the Shanghai exchange may raise margins on steel rebar contracts, which was later confirmed. DAX futures dip to approach 200-DMA, financials under pressure after HSBC warns low-vol environment could hit 2H revenues.

CHF and JPY marginally outperform in G-10, EMFX weaker against USD across the board. Core fixed income extends rally and bund curve flattens further, yet UST/bund spread widens 3bps as USTs lag amid focus on U.S. CPI data which may add to the recent dollar pains should inflation come in weaker than expected.

U.S. treasury yields fell to their lowest in more than six weeks ahead of inflation data expected to show a pickup in price growth, which could boost the chances of a further rate hike this year, while the Fed’s Kaplan and Kashkari are due to speak. The dollar declined against the Japanese yen for a fourth day as North Korea tensions remained elevated. The yield on 10-year Treasuries fell one basis point to 2.19 percent, the lowest in more than six weeks. Germany’s 10-year yield decreased three basis points to 0.38 percent, the lowest in more than six weeks.

Oil was modestly higher even though the IEA cuts its OPEC demand estimates for this year and next year by by 400bpd after revising down its demand estimates going back to 2015, rejecting OPEC’s own assessment of rising demand growth for the near future.

In addition to geopolitical fears, Friday’s CPI data in the U.S. will get close attention following an unexpected drop in wholesale prices in July. New York Fed President William Dudley cautioned that it will “take some time” for inflation to reach the central bank’s 2 percent target, the latest official warning that price pressures remain muted. The Federal Reserve Bank Dallas President Fred Kaplan speaks this afternoon. Also today, Moody’s may publish a review of South Africa’s credit rating, two months after reducing its foreign- and local-currency assessments to one level above junk.  JC Penney, Magna International and Telus are due to release results. July consumer price data is also due later.

Market Snapshot

  • S&P 500 futures down 0.1% to 2,434.25
  • STOXX Europe 600 down 1.0% to 372.26
  • DAX down 0.3% to 11,980
  • MSCI ASIA down 0.8% to 158.49
  • MSCI ASIA ex JAPAN down 1.5% to 515.81
  • Nikkei down 0.05% to 19,729.74
  • Topix down 0.04% to 1,617.25
  • Hang Seng Index down 2% to 26,883.51
  • Shanghai Composite down 1.6% to 3,208.54
  • Sensex down 1.1% to 31,193.00
  • Australia S&P/ASX 200 down 1.2% to 5,693.14
  • Kospi down 1.7% to 2,319.71
  • German 10Y yield fell 3.5 bps to 0.38%
  • Euro down 0.1% to 1.1759 per US$
  • Brent Futures down 0.9% to $51.45/bbl
  • US 10Y yield rose to 2.20%
  • Italian 10Y yield rose 2.1 bps to 1.743%
  • Spanish 10Y yield fell 0.6 bps to 1.452%
  • Brent Futures down 0.4% to $51.70/bbl
  • Gold spot up 0.1% to $1,287.31
  • U.S. Dollar Index up 0.04% to 93.44

Top Overnight News

  • The escalating war of words between Trump and North Korean leader Kim Jong-Un sent Asian markets tumbling as the region braced for more provocations from his regime next week
  • Treasury yields may climb from a six-week low if Friday’s U.S. consumer- price data merely meet expectations, as the market is on high- alert for evidence that inflation is heating up and supporting the Fed’s case for higher interest rates
  • For all the talk that Chair Janet Yellen’s plan to shrink the Fed’s balance sheet will hurt Treasuries, U.S. mortgage bonds face a bigger test
  • The International Energy Agency cut estimates for the amount of crude needed from OPEC this year and in 2018, after lowering its historical assessments of consumption in emerging nations including China and India
  • All that stands between German Chancellor Angela Merkel and a fourth term is six weeks of campaigning
  • RBA’s Lowe says next interest rate move likely up, but could be some time away; RBA prepared to intervene in A$ in ’extreme’ situations
  • Snap, Blue Apron Fall Flat as the Incumbents Smash the Upstarts
  • IEA Cuts Estimates for Crude Needed From OPEC This Year and Next
  • Chinese Regulator Starts Probe Into Tencent, Weibo and Baidu
  • Stolen 1MDB Funds Are Focus of U.S. Criminal Investigation
  • Health Insurers Face Long Odds to Win Reprieve of Obamacare Tax
  • U.S. Stocks Gain, Hong Kong Loses Weight in MSCI Indexes: SocGen
  • FBI Says ISIS Used EBay to Send Cash to U.S.: WSJ
  • Anbang Ownership Secrets Subject of U.S. Workers’ Complaint
  • Hollywood Heads For Its Worst Summer Box Office in a Decade
  • Credit Suisse Bans Trading in Venezuela Debt Faulted by Critics

Asia stock markets were heavily pressured amid continued geopolitical tensions after further fighting talk between US and North Korea, which also saw US indices close negative for a 3rd consecutive day. The fresh goading came from both sides as US President Trump suggested his fire and fury comments maybe was not tough enough and warned North Korea to get its act together or it will be in trouble like few nations have ever been. This evoked a response from North Korea which vowed to mercilessly wipe out the provocateurs and stated the US will suffer a shameful defeat. As such, ASX 200 (-1.2%), KOSPI (-1.7%) Hang Seng (-2.0%) and Shanghai Comp (-1.7%) all traded with firm losses, while Nikkei 225 was shut due to public holiday. PBoC injected CNY 70bln in 7-day reverse repos and CNY 60bln in 14-day reverse repos, for a net weekly drain of CNY 30bln vs. CNY 40bln drain last week.

Top Asian News

  • War of Words Between Trump and Kim Has Asia Bracing for Conflict
  • South Korean Banks Follow Won Lower Amid Rising Trump Rhetoric
  • China Data Dump and Alternative Gauges Both Signal Steady Output
  • Maker of India’s Aircraft Carrier Surges 22% on Trading Debut
  • Biggest India Lender Slumps as Bad-Loan Surprise Hits Profit
  • KKR Completes 26 Investments in China as of Aug. 1
  • Freeport Urged to Reinstate Workers to End Indonesian Strike
  • India July Local Passenger Vehicle Sales Gain 15% Y/y to 298,997
  • BlackRock’s James Lenton Joins Fidelity as Trader in Hong Kong

European indices are set for the worst week of losses this year as sentiment is weighed by the war of words between the US and North Korea. Weakness has been seen across the board (Eurostoxx 50 -1.0%), however mining names have notably underperforming amid Chinese metal prices slumping by some 5% overnight. EGBs supported by flight to quality with Bunds printing fresh session highs, while there had been reports of 5k lots tripping stops at 164.50. Peripherals underperform this morning, led by BTPs, subsequently the GER-ITA spread has widened to 162bps

Top European News

  • Morgan Stanley Makes ‘Multi-Year Call’ For Strong Euro on Reform
  • Europe Miners Slump as Metals Fall on China Steel Body’s Warning
  • Tullow Oil, Genel Energy Drop; GMP Cuts Both Stocks to Reduce
  • Old Mutual First-Half Profit Climbs as Insurer’s Split Looms
  • Merkel’s Bloc Holds All the Coalition Options in Latest Poll
  • Buy BNP Paribas, Credit Suisse; Sell Barclays, Goldman Says
  • Nordea Chairman Hints HQ Review Isn’t Limited to the Nordics

In currencies, safe-haven support for the currency has continued as USD/JPY made a brief break below 109.00 overnight. Although, with the war of words showing no signs of stopping, JPY could make a push back to the April low at 108.11. So far, the pair have traded in a narrow range with investor focus for the USD shifting to the US inflation figures due out later in the session. AUD softened in Asian trade as commodities prices slipped. Crude prices fell over 0.5%, despite Saudi Arabia and Iraq’s announcement to ensure that all major producers comply to the OPEC production cut, while Saudi also left the door open to deeper cuts. Additionally, Chinese iron ore prices fell some 5%, further weighed on the currency, subsequently pushing AUD to the mid 0.78.

In commodities, China state run newspaper editorial comments state China will remain neutral if North Korea launches an attack on US, but if US strikes first and tries to overthrow North Korean government, China will stop them. Saudi Arabia Energy Minister Al-Falih stated the possibility for continuation of output cuts is on the table and if the size of cuts need to be adjusted, this will be examined and subject to approval by 24 countries. North Korea vows to mercilessly wipe out the provocateurs, says US will suffer a shameful defeat, according to North Korean state media. IEA raises 2017 global oil demand forecast to 1.5mln bpd vs. 1.4mln bpd, global oil supply rose by 520k, while OPEC compliance fell to 75%.

US Event calendar

  • 8:30am: US CPI MoM, est. 0.2%, prior 0.0%; CPI Ex Food and Energy MoM, est. 0.2%, prior 0.1%
    • US CPI YoY, est. 1.8%, prior 1.6%; CPI Ex Food and Energy YoY, est. 1.7%, prior 1.7%
    • Real Avg Weekly Earnings YoY, prior 1.09%; Real Avg Hourly Earning YoY, prior 0.8%

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