Archive - Dec 10, 2013

Gold (>$1260) and silver (>$20) are extending yesterday's gains as US markets awake this morning. The crack higher at around 8:07ET caused the futures market to be halted after 3,000 Gold Futures contracts traded in one second at 08:07:45 on December 10, 2013 sending the price up $10 and tripping circuit breakers for 10 seconds. Silver is now +4% on the week and gold +2.5% as Treasuries are also bid. Stocks are stumbling overnight, driven by the "fundamentals" of a drop in EURJPY after it tagged 142 overnight and fell back.

As opposition party offices are raided and streets continue to fill with protesters, the "precarious" funding sitaution in the nation is beginning to flash red as interbank lending rates spike to 20%. Banks, clearly concerned about their own and each other's liquidity in the face of potential deposit runs (and the accompanying counterparty risk) and huge demand for liquidity. The hryvnia is falling and bond yields are rising but it is the spike in KievPrime overnight rates that is most concerning - and policy-makers have little room to help.

The average "Hope" phases last 10 months. In the US it is now running on 4 years... and counting.

• U.S. set to adopt Volcker rule to curb bank trading gambles (Reuters) After vote, lawsuits likely next hurdle for Volcker rule (Reuters)
• U.S. Congress budget talks could produce Tuesday deal, aides say (Reuters)
• Wealthy Go Frugal This Holiday Amid Uneven U.S. Recovery (BBG)
• Tearful Thai PM urges protesters to take part in election (Reuters)
• Fed’s Bullard Sees Higher QE Taper Odds as Labor Market Improves (BBG)
• Coeure Says ECB Would Offer More LTROs Only When Banks Can Lend (BBG)
• Inside China's Super-Sterile Chicken Farms (WSJ)
• Mandela Service Rivals JFK’s as Leaders Meet in South Africa (BBG)
• China data defy slowdown forecasts (FT), and of course the word is "data"
• Cold, ice grip U.S. as more snow to blanket East (Reuters)

The grind higher in equities, and tighter in credit, continues as markets brush aside concerns about a December taper for the time being. Overnight futures levitation has pushed the Fed balance sheet driven record high S&P even higher, despite as Deutsche Bank points out, the fact that we had three Fed speakers advocate or talk up the possibility of a December taper, including the St Louis Fed’s James Bullard who is viewed as a bit of a bellwether for the FOMC. Bullard said the probability of a taper had risen in light of the strengthening of job growth in recent months. Indeed, he noted that the best move for the Fed could be a small December taper given the improving jobs data but below-target inflation readings. The Fed could then pause further tapering should inflation not return toward target during the first half of 2014.  Looking at today’s calendar, the focus will be on US JOLTs job openings - a report which Yellen has previously highlighted as an important supplement to more traditional labour market indicators. US small business optimism and wholesale inventories are the other major data releases today. As mentioned above, US financial regulators are due to announce Volcker rules at some point today although as we just reported, the CFTC's meeting on Volcker was just cancelled due to inclement weather.