Archive - Jun 2, 2015 - Story

10Y Bund yields exploded over 17bps today to top 71bps for the biggest absolute yield increase since August 2012. Initially triggered off hotter-than-expected EU inflation, one can't help but wonder if the magnitude and linearity of the move had an invisible hand helping it out "to make room for more ECB buying."

In April we said that "sooner or later, in order to avoid liquidation and stave off severe disinflationary pressures, someone will have to call in "Helicopter Janet" and once the cash paradropping begins well, we'll see you in the Weimar Republic." Sure enough, the semi-official calls for helicopter drone cash drops have arrived.

After scaring millions of freshly created stock market speculators with a 10% 'correction' last week, it appears the PBOC's wealth-effect-creating, fix-the-leverage-overhang-with-temporary-stock-exuberance strategy was put into action with a record-smashing 4.4mm new accounts opened. Since Friday's lows, CHINEXT - China's tech-focused index - is up an astounding 16% (the largest ever 2-day swing). The Shenzhen Composite has also soared over 12% to fresh highs but we note the broadest-based Shanghai Composite has yet to make it back to last week's highs (even though it is up 9% from last week's lows).

There have been a steady stream of articles championing the ingenuity of U.S. tight oil producers for figuring out how to maintain production with fewer rigs. It doesn’t strike me as ingenious to produce more oil at low prices that ensure losing money. OPEC will meet on Friday (June 5, 2015) and most doubt that a production cut will result. If that is the outcome, expect the recent rally in oil prices to end badly.

Just days after George Soros warned that World War 3 was imminent unless Washington backed down to China on IMF currency basket inclusion, the hacker collective CyberBerkut has exposed the billionaire as the real puppet-master behind the scenes in Ukraine. In 3 stunning documents, allegedly hacked from email correspondence between the hedge fund manager and Ukraine President Poroshenko, Soros lays out "A short and medium term comprehensive strategy for the new Ukraine," expresses his confidence that the US should provide Ukraine with lethal military assistance, “with same level of sophistication in defense weapons to match the level of opposing force," and finally explained Poroshenko's "first priority must be to regain control of financial markets," which he assures the President could be helped by The Fed adding "I am ready to call Jack Lew of the US Treasury to sound him out about the swap agreement."

One look at FX trading this morning and all one can see is surging volatility and, for lack of a better word, turmoil. Which is precisely what Albert Edwards said would happen in his latest note overnight (released just as the USDJPY briefly breached 125) in which he observes that the Yen has now fully broken its 30-year support and predicts that "a new round of currency turmoil" is beginning.

The current asset bubble depends on a number of perceptions that could easily be put to the test by unexpected developments. There is a widespread consensus on a number of issues. This includes the belief that the economy will strengthen, that the emergence of “price inflation” is practically impossible, that “QE” will always guarantee rising asset prices, and that central banks have everything under control. Now we learn that in addition to this, a surprisingly large number of traders has no experience beyond the ZIRP & QE era of recent years. Meanwhile, the market’s underpinnings in terms of liquidity exhibit numerous weaknesses.

Driven by no immediate fundamental or news catalyst, EURUSD is spiking (running stops to almost 1.1200) sending the USD index into yet another flash-crash this morning... as the carnage in bunds continues (+11bps to 65bps)...

Following this morning's disappointing tumble in ISM New York (with 5 of the 6 components plunging), Factory Orders tumbled 0.4% MoM in April (against expectations of a modest 0.1% decline). This comes after March's exuberance-inspiring upwardly revised 2.2% MoM surge (which ended a 7 month streak of MoM drops). Down 6.4% against 2014, this is the 6th month in a row of YoY declines in Factory Orders - something not seen previously outside of a recession.

The S&P 500 dropped briefly below 2,100 testing its 50-day moving-average and the Russell 2000 and S&P MidCap 400 both broke below their 50-day moving-averages. But remember, Greece is irrelevant and any correction is a healthy buying opportunity...

DIJSSELBLOEM SAYS CREDITORS STILL FAR FROM A DEAL WITH GREECE
DIJSSELBLOEM SAYS PROGRESS ON GREECE STILL SLOW, INSUFFICIENT
DIJSSELBLOEM SAYS: GREECE DEAL NOT THEORETICALLY POSSIBLE THIS WEEK

Update: *UNITED AIRLINES GROUND STOP LIFTED BY FAA

Just minutes are bomb threats have been evaluated as a hoax, we get news of a much more widespread issue:

*ALL UAL FLIGHTS ARE GROUNDED DUE TO "AUTOMATION ISSUES": FAA

All United Airlines flights have been grounded as of Tuesday morning at 9:35 a.m ET, according to the Federal Aviation Administration.

It’s not the case that every one of these middle- and upper-class households turned to pawnshops and payday lenders because they got whomped by an unexpected bill from a mechanic or a dentist. “People who are in these [non-bank] situations are not using these forms of credit to simply overcome an emergency, but are using them for basic living experiences,”

Who could have seen this coming? Just 24 hours after the NSA goes "dark" from "securing" the nation against terrorist threat (by recording and storing all domestic phone calls) we get this:

BOMB THREATS PHONED INTO AIRPORTS, CNBC SAYS

According to NBC, these threats are against planes already in the sky.