Archive - Nov 2015 - Story

After 2 months of notably unusual negative prints, November's Philly Fed rose from -4.5 to +1.9 (the best MoM rise since June). Sadly, the survey's headline gains were driven by a big surge in 'hope' as the outlook surged from 36.7 to 43.4, as under the covers of the current business environment was a collapse in prices paid, further deterioration in new orders and shipments, and a plunge in average workweek.

After an exuberantv-shaped recovery of hawkish fed minutes, WTI Crude (Dec contract) has tumbled back below $40 this morning following warnings from Goldmn Sachs of the potential for a "sharp leg lower" to $20 handle given expectations for warmer-than-normal weather this winter.

"Paris prosecutor says Abaaoud was been identified dead at the scene by his fingerprints. His body was found "riddled with impacts."

1. Top Trade #1: Long USD vs short EUR and JPY
2. Top Trade #2: Long US 10-year ‘Breakeven’ Inflation
3. Top Trade #3: Long MXN and RUB versus short ZAR and CLP.
4. Top Trade #4: Long EM ‘External Demand’ vs. Banks stocks
5. Top Trade #5: Tighter Spread between Italy and Germany Long Rates
6. Top Trade #6: Long large-cap US Banks relative to the overall S&P500

• Soothing Fed sounds send shares, emerging markets higher (Reuters)
• Belgian Police Conduct Raids in Connection With Paris Attacks (WSJ)
• The Paris Attacks Can’t Lead to a Closed Europe (BBG)
• Alleged Mastermind of Paris Attacks Was ‘Emir of War’ (WSJ)
• U.S. Eyes Russia-Iran Split in Bid to End Syria Conflict (WSJ)
• Despite tensions, Asia-Pacific nations close ranks against terrorism (Reuters)

Moments ago Bloomberg's Richard Breslow explained why the ECB's minutes, since they would confirm the dramatically easing nature of the upcoming ECB action, are far more important than what the Fed disclosed yesterday. And now, here are the minutes themselves, with the following summary courtesy of Bloomberg.

The ECB has real policy choices they will have to choose between, and the implications are real. A further foray into negative deposit rates, extension and enlargement of QE, even a less likely change to the main financing rate. Each choice has externalities internally and is also likely to provoke a reaction from other affected countries. The Riksbank and SNB will be watching as closely as EGB traders. The ECB is in easing mode. The Fed plans to tighten. Relative value trades have further to play out

While it is still unclear just why the FOMC Minutes which are said to have made a December liftoff "more likely" unleashed a dramatic market rally, one which sent both stocks and TSYs higher, the sentiment continued overnight, with both Asian stocks surging on the US momentum, as well as Europe, where the DAX gapped solidly above the 200 DMA as most European shares advanced, led by resources, travel stocks. U.S. futures continue their ramp higher, and at last check were another 8 points, or 0.4%, in the green.  But if the Fed Minutes were enough to unleash the latest leg in this rally, than the ECB's own minutes due also today, should send futures back over 2100 without much difficult, regardless of their actual content.

As a result of the latest announcement by ISIS, namely that it had just executed its first Chinese hostage, China's isolationist position has now changed and as Bloomberg reports "Xi Vows Terror Fight After IS Kills Chinese Captive".  As it further adds, China's President Xi Jinping condemned the Islamic State’s execution of a Chinese national, "an act that raises pressure on China to take a greater role in resolving Syria’s civil war."

Aside from some vague reassurance that the Reverse Repo - IOER corridor "should" work, there has been no detail on the topic. To Jefferies this is a glaring problem: "The lack of any discussion of liftoff logistics is puzzling to us and a potentially significant communication snafu."

“Apparently, it’s a kind of a ‘honey is sweet, but the bee stings’ situation: they want IS to weaken Assad as soon as possible to make him leave somehow, but at the same time they don’t want to overly strengthen IS, which may then seize power."

No outside force can end freedom in America. The only force that can end freedom in America, is the American government itself. This is the main lesson of the 15 years since 9/11.

The market's reaction to today's FOMC Minutes was, to some, a little odd given the "December is on" hawkish narrative being sold to the public. Stocks rallied, longer-dated bonds rallied, gold managed gains, and the US Dollar sold off... not exactly the reaction one would expect from a 'hawkish' Fed statement. But there is one thing that would explain those moves... and it appears Goldman Sachs found it buried deep inside the 12 pages of Minutes...