Another day, another OPEC Production Cut rumor, and another massive swing in WTI Crude oil prices (+11.5% - biggest since Feb 09). But having run stops to these levels, we wonder what happens next?
The Fed's Bill Dudley just unleashed the most cognitively dissonant statement of his career. That superlative is highlighted by theses two headlines:
DUDLEY SAYS U.S. ECONOMY IS IN QUITE GOOD SHAPE
DUDLEY: DON'T SEE NEGATIVE RATES HAVING 'BIG CONSEQUENCE'
Try telling The BoJ's Kuroda that!!
After starting out strongly this morning, with DB stock trading just shy of $17/share, European banks have seen some weakness in the past 30 minutes following a report from Reuters, in which sources were cited as saying that there is "firm support for a deposit rate cut within the European Central Bank's Governing Council."
Having already warned of a "deflationary mindset," today's University of Michigan Confidence data suggests Americans are falling deeper into dis-inflation territory. Today's headline tumble in confidence to 4-month lows, with "hope" dropping to 6-month lows is dominated by the plunge in 5-10 year inflation expectations to 2.4% (from 2.7%) - a 36-year record low.
After some stabilization into mid-2015, the ratio of business inventories-to-sales has surged as sales have disappointed and mal-investment-driven dreams have over-stocked. Business inventories rose 0.1% MoM in December (retail up 0.4%) and sales tumbled 0.6%. At 1.39x, the current ratio is flashing a warning that a deep de-stocking recession looms.
What NIRP communicates is: this sucker's going down, so sell everything and hoard your cash and precious metals. If that's what the central banks want households and enterprises to do, NIRP will be a rip-roaring success.
Even a modestly deeper look below the strong retail sales headline numbers once again reveals just how this "across the board beat" was accomplished. It was all in the seasonal adjustment.
"Each of the 26 countries in the open-travel Schengen Area is allowed to unilaterally put up border controls for a maximum of six months. That limit can be extended for up to two years if a member nation is found to be failing to protect its borders."
There was much at stake in today's retail sales report, because had the Census reported another miss in the headline, ex auto and control group data, it would have made the Fed's job of maintaing the illusion of a recovery into a rate hike cycle virtually impossible. Luckily for Yellen, the numbers came out and they were were beats across the board.
Deustche Bank stock is ripping 10% higher after confirming old news that it will undertake a modest debt buyback of $2 billion and €3 billion (not including the CoCos). Have no fear though as Wolfgang Schaeuble proclaimed Deutsche Bank is a "strong bank" that ios "resilient" and "well positioned."
As the following chart from Reuters shows, the year-to-date stock price performance for most European banks is on pace to far surpass - to the downside - the dreadful for the global financial system 2008.
DB's Jim Reid today writes that "Markets are crying out for a circuit breaker at the moment." There is just one problem: nobody knows what this circuit breaks would and should be, or if it would even work.
- Yellen's dilemma: A downturn with no easy response (Reuters)
- Clinton, Sanders clash over Obama as they vie for minority votes (Reuters)
- Risk Grows of Markets Sparking Recession (WSJ)
- Global Stock Rout Eases Amid Oil Advance as German Bonds Decline (BBG)
- U.S. Benchmark Yield Will Be at Record Low in March at This Rate (BBG)
- Oil Prices Rally on Hopes of Production Cuts (WSJ)