Archive - Nov 2015

It may be all about ISIS these days, but just because al-Qaeda has been relegated to terrorist also-ran status doesn't mean they're not still operating and indeed, AQAP is still considered the group's most active and powerful branch. New footage uploaded today depicts a massive explosion at a checkpoint near Shibam, Yemen (the "Manhattan of the desert") as al-Qaeda battles both the Iran-backed Houthis and government forces for control of the country.

After mounting a solid bounce off the September lows, European equity markets are now running into resistance.

"It is time to sell crude oil once again, and the risks are small while the potention seems large. Let’s sell a bit of both WTI and Brent crude, sufficient to be one unit in aggregate with nearby January WTI trading at or near to $41.85 and nearby Brent trading at or very near to $44.23."

Between the French (Interior Minister Cazeneuve: "we're face with a new kind of terrorism", and Hungary (PM Orban: "allowing people into our own back yard" who may then commit acts of terrorism was irresponsible), AP reports that the EU's founding treaty with regard to passport-free travel - the so-called Schengen Agreement - is to be reformed. "We want Europe, which has lost too much time on a certain number of questions, to note the urgency and take decisions today," exclaimed Cazeneuve, with Orban adding "the founding treaty is currently an obstacle to this and I believe it needs to be reconsidered." According to Cazeneuve, the reforms will happen by year-end.

European Union countries are preparing to crackdown on virtual currencies such as bitcoin, and anonymous payments made online and via pre-paid cards "in a bid to tackle terrorism financing after the Paris attacks, acording to a draft document."

In the past hour several video clips have emerged from Mali, showing the tense situation where an estimated 10 gunmen, according to AFP, have taken dozen of hostages and where Mali, French and US special forces are now engaging the hostage takers.

• French, U.S. Troops Enter Mali Hotel as Gunmen Hold Hostages (BBG)
• Top suspect seen on CCTV in metro during Paris attacks (Reuters)
• Paris Attacks’ Alleged Ringleader, Now Dead, Had Slipped Into Europe Unchecked (WSJ)
• Global shares march on as alarm bells ring for metals (Reuters)
• European Stocks Rise With Asian Shares as Zinc, Ringgit Advance (BBG)
• World leaders arrive for summit amid heavy security (Reuters)

Futures are modestly higher in early trading having tracked the USDJPY once again almost tick for tick, with the carry trade of choice rising to 123 shortly after Mario Draghi's latest speech pushed the dollar strong initially only to see most gains promptly evaporate against both the Yen and the Euro. European shares are likewise little changed, after gaining earlier, while Asian stocks rise; oil also advanced in early trading only to drop to its lowest overnight level moments ago, a few dimes over $40, with aluminum and copper both posting modest increases.

Some First World governments have taken a decidedly Third World turn.

"We see a risk that the ‘Bernanke put’ will gradually be replaced by the ‘Yellen call’. The ‘Bernanke put’ captured the intuition that when the risks to growth, monetary policy reacts aggressively to bad news. Now that these risks have receded, we expect the Fed will shift to an easing bias, implying that monetary policy will likely begin to react more aggressively to good news... Rallies in risk sentiment may be met by less accommodative monetary policy – the ‘Yellen call’.

While the initial EUR response was as expected, dropping about 30 pips (but already rebounding on concerns that the Draghi bazooka may truly be empty this time - after all what else can he surprise with as CA's Valentin Marinov said), German Bunds, especially the short-end, were quick to give Mario Draghi the middle finger and the 2Y has dropped to a fresh record low of -0.389%, because all they heard was that the ECB will monetize even more debt.

Yesterday, there was pent up expectation that the ECB's latest minutes, by being structurally dovish and thus the opposite of the Fed's own minutes, would unleash another round of EUR weakness. This did not happen, and instead not only did the EUR jump during the day, but the USD saw an unexpected round of all day weakness. Many were surprised by this response. It turns out Mario Draghi was merely biding his time, and in a speech released moments ago, titled "Monetary Policy: Past, Present and Future" delivered at the European Banking Congress, Draghi pulled another "whatever it takes" card, and promptly sent the Euro currency reeling, if only for the time being.

We wonder how long until someone finally asks the all important question regarding the Islamic State: who is the commodity trader breaching every known law of funding terrorism when buying ISIS crude, almost certainly with the tacit approval by various "western alliance" governments, and why is it that these governments have allowed said middleman to continue funding ISIS for as long as it has?

"In just the first few days, [Russian] aviation has destroyed 500 fuel tanker trucks, which greatly reduced illegal oil export capabilities of the militants and, accordingly, their income from oil smuggling."