Archive - Oct 16, 2014

If you thought the last several days were volatile in the market, you ain't seen nothing yet: judging by the early liquidity, or rather complete lack thereof, in the market moving E-Mini contract, the asset class through which as we disclosed a month ago central banks directly manipulate markets with the CME's blessing, then we urge all those who have stop losses close to the NBBO to quietly pull those as they will get hit adversely. The reason? As this Nanex chart of ES orderbook levels show, there is zero, zilch, nada liquidity in the ES.

Nanny State Can't Be Bothered Protecting Us from Ebola?

As we noted last week, when there is no hiring, there is no firing and so it is that initial jobless claims collapsed to 264k this week (versus 290k expectations) - the lowest since April 2000 (and 2nd lowest ever on record). That is not what the market wants to hear right now... it is craving bad news to get The Fed re-engaged. Continuing claims inched higher from 2.382 million to 2.389 million but remains near cycle lows. To sum up: its never been better than this for employment... according to the government-supplied data.

Forward inflation expectations for Europe have collapsed to all-time record lows (based on 5Y forward implied 5Y inflation) as the market grows increasingly impatient at Draghi's dragging his "whatever it takes" feet on pulling the sovereign QE trigger. With 8 European nations now in outright deflation, the growing political pressure on the ECB to actually "do" something is, however, equal and opposite to Germany's (read Buba's) insistence that member states have some fiscal discipline (oh and the fact that OMT may just be exactly what we always said it was - illegal and a mirage).

Here is why the center will hold.

Despite the substantial beat in Goldman revenues and EPS, average employee comp actually fell modestly to $385,821 in Q3, although Goldman did boost total headcount from 32,400 to 33,500 in the third quarter, bucking the layoff trend seen at every other bank.

• Dallas County May Declare State of Disaster From Ebola Virus (BBG)
• Markets on edge after worst turmoil in four years (Reuters)
• Central bankers may have no quick fix as markets swoon, economy weakens (Reuters)
• Risk of Deflation Feeds Global Fears  (Hilsenrath)
• U.S. health official allowed new Ebola patient on plane with slight fever (Reuters)
• Texas Hospital Fights Allegations About Ebola Protocols (BBG)
• Treasuries Gain as Oil Drops Below $80 While Stocks Slide (BBG)
• Greek Bonds Slump on Bailout Concern as Spain Misses Sale Target (BBG)
• White House shifts into crisis mode on Ebola response (Reuters)
• Obama Confronts Slippery Slope as Islamic State Advances (BBG)

Yesterday afternoon's "recovery" has come and gone, because just like that, in a matter of minutes, stuff just broke once again courtsy of a USDJPY which has been a one way liquidation street since hitting 106.30 just before Europe open to 105.6 as of this writing: U.S. 10-YEAR TREASURY YIELD DROPS 15 BASIS POINTS TO 1.99%; S&P FUTURES PLUNGE 23PTS, OR 1.2%, AS EU STOCKS DROP 2.54%.

Only this time Europe is once again broken with periphery yields exploding, after Spain earlier failed to sell the maximum target of €3.5 billion in bonds, instead unloading only €3.2 billion, and leading to this: PORTUGAL 10-YR BONDS EXTEND DROP; YIELD CLIMBS 30 BPS TO 3.58%; IRISH 10-YEAR BONDS EXTEND DECLINE; YIELD RISES 20 BPS TO 1.90%; SPANISH 10-YEAR BONDS EXTEND DROP; YIELD JUMPS 29 BPS TO 2.40%.

And the punchline, as usual, is Greece, whose 10 Year is now wider by over 1% on the session(!), to just about 9%.