Archive - Jan 21, 2015

Gold's 12-day swing of around 12% is the best since just before the Swiss capped the Franc in 2011 and the precious metal has topped 1,300 for the first time in 5 months this morning as, despite exuberance in Chinese stocks, it appears anxiety is setting in that tomorrow may not be all it's cracked up to be from Draghi. Bond yields are re-tumbling with 30Y pressing to 2.36% record lows (and 2s30s at new 6 year lows). US equities have given back about half yesterday afternoon's rampfest...

"...with the large downward revision to its core CPI outlook, the bank is more or less acknowledging a much lower possibility of achieving the 2% price stability target by around FY2015. Yet, at the press conference following the MPM, Governor Kuroda said he still held the view that 2% could be achieved by around FY2015. Domestic investors have been skeptical of the BOJ’s target from the outset, and now foreign investors are also beginning to question the BOJ’s logic and communication with the market. We believe the mixed signals the BOJ is sending may well serve to further undermine confidence in the bank." - Goldman

• Obama Targets Income Gap in Address That Shapes 2016 Election (BBG)
• Republicans Reject Obama’s Main Economic Proposals (WSJ)
• Senate’s Shelby Says White House Bank Tax Is Dead on Arrival (BBG)
• Is Dollar Next? Investors Reassess After Swiss Shock: Currencies (BBG)
• Bank of Japan Cuts Price Forecast, Maintains Record Stimulus (BBG)
• Pound Weakens After BOE Policy Makers Drop Call to Raise Rates (BBG)
• Putin not flinching on Ukraine despite economic crisis (Reuters)
• Indonesia will not make public full preliminary AirAsia crash report (Reuters)
• Party Hasn't Stopped for Russians at Davos Even With Ukraine Sanctions (BBG)

Three days after Chinese stocks suffered their biggest plunge in 7 years, the bubble euphoria is back and laying ruin to the banks' best laid plans that this selloff will finally be the start of an RRR-cut, after China's habitual gamblers promptly forget the market crash that happened just 48 hours ago and once again went all-in, sending the Shanghai Composite soaring most since October 9, 2009.  It wasn't just China that appears confused: so is the BOJ whose minutes disappointed markets which had been expecting at least a little additional monetary goosing from the Japanese central bank involving at least a cut of the rate on overnight excess reserves, sending both the USDJPY and US equity futures lower. Finally, in the easter egg department, with the much-anticipated ECB announcement just 24 hours away, none other than the ECB's Ewald Nowotny threw a glass of cold water in the faces of algos everywhere when he said that tomorrow's meeting will be interesting but one "shouldn’t get overexcited about it."

Big Corporations Are Only Part of the Problem …

The old joke is "In America, you correct newspaper, but in Soviet Union, newspaper corrects you.” Switzerland is now experiencing the bond market equivalent.