Archive - Feb 4, 2015

To say that the PBOC is confused at this moment is a very big understatement: on one hand, yesterday the PBOC moved its reference rate for the yuan outside the daily trading band for the first time in 21 months, forcing the currency to strengthen as authorities seek to limit volatility in capital flows. And then just hours later, as reported first thing this morning, the same PBOC announced its broad RRR cut - the first one since May 2012 -  an attempt to ease ongoing, and thus tightening, capital outflows, and pushing the currency lower in the process. In short: unlike other central banks who hope that institutional and retail investors figure out their FX intentions and help them out by "frontrunning" their moves (which may never come) in what is now a clear and global currency war, China is certainly not making it easy for FX traders to figure out what will happen next.

How can traders position the oil trade in the current environment?

If you thought the Dijsselbloem-Varoufakis 'exit' was uncomfortable; watching Jean-Claude "when it's serious, you have to lie" Juncker grab Alexis Tsipras' hand in an awkward solidarity gesture as they ambled off stage today was eye-gouging... Perhaps the biggest news overnight was Varoufakis comment that GREECE `WILL NEVER SEEK FINANCIAL AID' FROM RUSSIA but broadly speaking conversations continue with "no change" - Greek FinMin Varoufakis told ECB's Draghi about his "government’s utter and unwavering determination that it can’t possibly be business as usual in Greece," and The IMF has stated that there has been no discussion with the Greek government on a change to the framework. Varoufakis is on his way to meet Germany's Schaeuble next.

Having beaten expectations for the past 4 months, in the face of a surge in jobless claims across Shale states, it appears January's print is finally catching down to a weaker expectations as layoffs dominate headlines as even Mark Zandi is forced to admit "Businesses in the energy and supplying industries are already scaling back payrolls in reaction to the collapse in oil prices, while industries benefiting from the lower prices have been slower to increase their hiring." At 213k, this is the lowest print in 4 months, missing expectations of 223k and dramatially down from December's upwardly revised 253k (from 241k) - the biggest drop since August as small business job growth slides significantly.

Back in September 2010, Petrobras conducted what was then the largest share sale (to date) in history, when US$72.8 billion worth of shares in the company were sold on the BM&F Bovespa stock exchange. Upon its IPO, Petrobras became the fourth-largest company in the world by market capitalisation. Those days are long gone now, and following the triple whammy of a Brazilian economy in tatters coupled with plunging oil prices and an unprecedented corruption scandal, not only is its stock plumbing unseen ultradeep water depths, but Petrobras has rarely been in a worse shape than right now. Which is perhaps why moments ago the CEO of the semi-national company - which was the largest in Latin America by revenue as recently as 2011 - Maria das Graças Foster, "resigned" according to a filing with Brazil's securities regulator.

• Arab World Unites to Condemn ‘Barbaric’ Death of Jordanian Pilot (BBG)
• Jordan hangs two Iraqi militants in response to pilot's death (Reuters)
• As Oil Prices Climb, Some Harbor Doubts (WSJ)
• Taiwan plane cartwheels into river after take-off, killing at least 19 (Reuters)
• Seven dead as commuter train hits car near New York City (Reuters)
• Apollo’s 600% Profit on Oil Company Leaves Rivals Behind (BBG)
• Greece's rock-star finance minister Yanis Varoufakis defies ECB's drachma threats  (Telegraph)

Following the torrid surge in crude in the past 4 days, overnight oil price have taken a step back - if only until the "newer normal" 2:30pm ramp into the Nymex close -  with both Brent and WTI down nearly 3%, with yesterday's latest API inventory data showing another massive crude build when it was released after the close, which in turn is pressuing futures modestly if decidedly, and not even the surprise PBOC RRR-cut (which many had seen as likely if only in advance of the liquidity sapping Chinese New Year) which hit the tape an hour ago managed to push ES into the green, at least for now. Curiously, not even the now standard low volume levitation in the USDJPY in recent trading has had any impact on US futures, which appear to have found a new correlation regime for the time being, one which tracks what oil does more than any other asset class.

Moments ago the number of central banks who have eased so far in 2015, most of them unexpeted, rose by one more from 15 to 16, when in addition to Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and, most recently, Australia it was China's turn to do what so many banks had said was inevitable, even if meant backtracking on all its blustery talk about limiting bad debt expansion, and cut its reserve requirement ratio for bank by 0.5% effective Thursday, to boost liquidity and support the economy.

Earlier this evening, shortly after take-off from the Taiwanese capital of Taipei, a commercial aircraft with 58 people on board clipped a bridge and crashed into a river. As AP reports, the death count is either 2 (aviation authority) or 3 (Central News Agency) which is simply stunning considering the following unbelievable clip...