High-beta growth-hoping Russell 2000 stocks managed to gain 5.2% from last week's lows and make new all-time highs - sure why not. The S&P and Nasdaq regained Friday's highs on moar hopes of a deal (and held them even on the meeting postponement) giving a little back into the close. Spot VIX hugged stocks all day long and as with EURJPY (carry) provided the ammunition on a day bereft of real news and strewn with rumors. With Cash Treasuries closed, futures indicated early modest strength which gave way to selling across the complex in the afternoon. The shortest-dated Treasury futures underperformed (we suspect on some liquidity premia given Bills were closed). Gold and Silver recovered to solid gains before the US equity exuberance began, then leaked lower all day long (gold unch, silver -0.35%). It wasn't all ponies and unicorn farts for the bulls though as December VIX futures went well bid this afternoon - notably divergent from equity's exuberance.
In the midst of a domestic crisis, it is easy to forget that the rest of the world is watching. Now that the U.S. federal government has shut down for the first time since the mid 1990s, the talk of the town is the political problems of the world’s largest economy and sole superpower. In China, most media reports about the shutdown have been merely informative, but every now and then they offer a rare insight into what the Chinese have learned about America’s shortcomings. Yet other commentators find the federal shutdown inspiring. the newspaper Nanfang Dushi Bao commended the strength of American society for being able to function without the government. Interestingly, while the American public sees the shutdown as a government failure, some Chinese are seeing it as a sign of efficiency.
Headlines just hitting:
- *MEETING BETWEEN OBAMA, CONGRESSIONAL LEADERS POSTPONED
- *WHITE HOUSE MEETING POSTPONED TO ALLOW FOR FURTHER TALKS
- *WHITE HOUSE STATEMENT SAYS DELAY TO GIVE MORE TIME FOR TALKS
Seems like there is no deal for now then... and sure enough that hope premium in stocks is fading
Though it has not received the same amount of media attention as Syria and Egypt, Barclays points out that Iraq has witnessed a relentless wave of bombings and shootings this year and the risks are rising of a return to serious sectarian strife and widespread civil unrest. This is raising the risk of serious sectarian strife and widespread civil unrest, with implications for oil production, exports, and regime stability.
On Saturday, millions of Americans across 17 states found themselves in an unfamiliar situation: they couldn't rely on the US government for their daily foodstamp-funded bread. The result was anger, confusion and sometimes, outright panic, as shoppers left their full shopping carts in stores, and departed their favorite general retailer in a daze. However, while most outlets that accepted EBT were experiencing a one-day, non-recurring hit to their EPS, several Walmart stores in Louisiana decided to brave through the Xerox-induced blackout for several hours by eliminating the spending caps on EBT cards, leading to nothing short of shopping stampedes. The result, as CBS reports, is that "Walmart and local police ... were called into the stores to help maintain order Saturday as shoppers swept through the aisles at two stores and bought as much as they could carry."
If one looks at various sovereign states, it seemingly doesn't matter that their public debts continue to rise at a hefty clip. The largest ones are considered to have economies that are big and resilient enough to be able to support the growing debt load. Part of the calculus is no doubt the notion that they contain enough accumulated wealth to allow their governments to confiscate even more of their citizens property and income in order to make good on their debts. Then there are the small and mid-sized states in the EU that are getting bailed out by their larger brethren, or rather, the tax payers of their larger brethren. However, things are different when the territories or municipalities concerned are considered too small and have no such back-up. Detroit was a recent case in point, and it seems that the US territory of Puerto Rico is the next domino to fall.
As we noted earlier, this is not what the White House was hoping for. Thanks to no T-Bill police being at work today and on the back fo JPY-carry trades, the S&P 500 has now joined the NASDAQ in the green for the day having risen non-stop since Europe closed. Treasury futures are selling off notably too (and were higher in yield long before equities went green) - with the 5Y (shortest maturity trading) the worst hit. It's unclear whether the Treasury weakness is just a reflection of equity exuberance or (given the short end weakness) reflects anxiety over the deadline.
Despite the apparent preponderance of polls proclaiming the Republicans as the party at fault (with their ratings at record lows); it appears there are no winners in this game of global macro economic war. President Obama's job approval rating has plunged to two-year lows, near all-time lows.
White House Was Not "Expecting A Stock Rebound" This Morning, "They Were Bracing For A Negative Market Reaction"Submitted by Tyler Durden on 10/14/2013 - 13:05
When asked by Tom Keene about the "modest recovery" in stocks earlier this morning (which as of this post are unchanged), Bloomberg TV's Julianna Goldman responds quite simply: "that's not what White House officials were expecting or necessarily wanting this morning. They were all bracing for some negative market reaction that's going to be the fire that's alight under everyone."
UPDATE: *OBAMA SAYS REPUBLICANS MUST SET ASIDE SOME PARTISAN CONCERNS
Senator Harry Reid has a cunning new plan and says "we're getting closer," providing yet more hope that the US won't tip inauspiciously over the edge of the economic abyss. The latest rumored deal proposal, to be presented at the White House meeting at 3pm, includes automatic spending cuts, a framework for budget negotiations, extends the debt ceiling for 6-9 months, and funds the government through December at current sequester levels. Doing so, as AP reports, would punt the fight over whether to lock in 2014 sequestration levels at $967 billion until December. And by extending the debt ceiling until the middle of next year, it would put the issue in the center of the heated 2014 midterm elections. While this provided some short-term optimism, Obama was quick to remind the market that "it appears that has been some progress in the Senate in fiscal impasse negotiations and will see if it is real when he meets congressional leaders."
Five years ago, when QE first started, we blasted the Fed's "Plan Z" systemic rescue "policy" - which was merely a tried and true dilutive fallback plan used by every collapsing monetary regime starting with the Romans - stating it does absolutely nothing to resolve the biggest underlying threat to the economy and the western way of life, namely the epic accumulation of debt (most of it bad), courtesy of a Fed which has now unleashed a perpetual "buyer of only resort" QE (as we predicted months before QEternity was revealed), which instead only redistributes wealth from the middle class to the wealthiest 0.01%, while providing scraps to the poorest to keep them occupied and away from very violent thoughts. Enter the FT, which in an Op-Ed today titled "QE has stigmatised the well-off" says that "despite it being entirely justified as a save-the-world policy in its first round, it is still at best an unfair and at worst an evil policy. Why? Because of the way in which it redistributes wealth" And now we lean back and await for even more of the incisive mainstream media to suddenly come up with this timely, non-conspiratorial observation.
Yesterday afternoon, we tweeted:
What time tomorrow do we get the hope rally? Odds are between 10:30 and 10:45. Rejection news naturally just after 4 pm
— zerohedge (@zerohedge) October 14, 2013
And on the back of a statement from the White House that Obama and Biden will meet with McConnell, Reid, Pelosi, and Boehner - but "will not pay ransom" - and with the T-Bill market police on vacation, equity markets are surging back towards green (removing once again any incentive to act).
The fine upstanding people at the NASDAQ noticed something odd this morning with SBAC:
*POTENTIALLY ERRONOUS 'SBAC' TRANSACTIONS BEING PROBED
After some discussion, they have decided that it is indeed erroneous that, as Nanex notes, SBA Communications (a $10 billion market cap company) should see its stock price jerk from $80 to $299.73 in the space of a few seconds. NASDAQ will be canceling these trades on behalf of the participants involved (we suspect the "buying" algorithm is more relieved than the "seller")
Japan’s plan to raise taxes while expanding stimulus received “widespread skepticism” at the meeting of Group of 20 policy makers, according to Chinese Deputy Finance Minister Zhu Guangyao. "Japan, on the one hand, plans to raise consumption taxes next year," Zhu told reporters in Washington during the G-20 meetings. "On the other hand, it plans to unleash a fresh round of 5 trillion-yen economic stimulus to stem the economic slowdown. Such strategy received widespread skepticism."