Archive - May 26, 2014 - Story

It's called a stereotype for a reason...

The recent public outcry over high frequency trading is pointless. Solutions exist. Virtually every comparable market in the world uses them already. But, some electronic exchanges may not willingly adopt them. Doing so may disrupt their current business model. The incentives are misaligned, and competitors or regulators may need to force the issue to see change. Luckily, the issue to be forced is far simpler than most think. It’s time to add quality to the matching process.

On this day when we should never forget, we are sure President Obama, fresh from his surprise snubbing of Karzai in Afghanistan, will try his best to remember who was in charge (and ultimately accountable) when the VA scandal broke.

It appears the tit-for-tat cyber-spying debacle between China and the US is escalating (unless it's all curious coincidence). Having blasted the US as a "mincing rascal" and "high-level hooligan" in the Chinese (state-run) media, The FT reports that authorities have ordered state-owned enterprises to cut ties with US consulting companies such as McKinsey and Boston Consulting Group because of fears they are spying on behalf of the US government. Furthermore, the crackdown is worse as, in the face of the "US hacker empire," China’s leaders announced on Thursday that all foreign IT products and services sold in China would be subject to a new security screening process. So it seems China has entered both the currency war (CNY weakness) and protectionism racket... now how has that ended for the world in the past?

There is evil, and then there's organized evil. Large-scale evil requires surrender of autonomy, coercion by a central authority and a willingness to follow orders.

For those pressed for time, here is the one-chart post-mortem of what happened in yesterday's elections for European Parliament: the malcontents block, or the anti-EU and protest parties, soar and now control nearly a third of all seats, up nearly by 33% from a fifth currently, in the parliament they all predominantly loathe.

Ukraine didn't waste much time after its presidential election, which appears to have been won outright by the chocolate tycoon Poroshenko much to the humiliation of once frontrunner Tymoshenko, to resume its military operation in the east. Early this morning, the newswires blasted that Ukraine warplanes have carried out an airstrike against pro-Russian separatists at the Donetsk International Airport. This happened after forces belonging to the self-proclaimed Donetsk People's Republic, which proclaimed its independence from Kiev last weekend, came to the airport demanding that Ukrainian troops leave it. The self-defense troops said some 200 Kiev soldiers were guarding the inner perimeter of the hub. All flights have been suspended.

S&P (futures over 1900 for first time), Dow, and Nasdaq futures markets are all pressing new higher-highs this morning on the heels of Europe's dismal election news overnight. Helped early on by JPY weakness, stocks now have a mind of their own and have disconnected from an unchanged Treasury futures market (cash is closed) and a fading EURJPY/USDJPY carry trade. European peripheral bonds are the must-have asset of the day with Portuguese bonds particularly loved. Italian stocks are the high-beta idiot-maker trade today (+2.8%).

Anti-European-Union parties are showing strongly in this weekend's elections. Anxiety is spreading among the status quo as Greece's anti-austerity party SYRIZA wins and perhaps even more worryingly in supposed core of the union France's Nationalist party is leading in a "political earthquake" success:

EUROPEAN GOVERNMENTS MUST RESPOND TO CITIZENS' ANGER, SAYS 'SITUATION IS GRAVE FOR FRANCE, EUROPE'; DRAGHI SAYS PEOPLE VOTING ACROSS EUROPE ARE CLEARLY DISENGAGED

The US and UK markets may be closed for holiday today but that doesn't mean that US equity futures can't spin this weekend's resurrection of anti-EU sentiment in Europe, coupled with the just confirmed  resumption of the "anti-terrorist" operation in Ukraine (more on that shortly) following its anticlimatic presidential elections in a positive light. They can and they have, and even though the USDJPY low volume ramp is oddly missing overnight, and 10 Years appear bid, spoos are set for another record high, and are already trading up 0.2% at 1901.3, above 1900 for the first time ever. European shares remain higher with the autos and bank sectors outperforming and food & beverage, basic resources underperforming. The Italian and German markets are the best-performing larger bourses. The euro is little changed against the dollar. Greek 10yr bond yields fall; Italian yields decline.