Archive - 2015 - Story

Another data point to ignore... Kansas City Fed's business survey has crashed from a hope-full bounce. Dumping from a +1 print in October, Kansas collapsed to -9, the weakest since May 2015 as across the board components were abysmal. Production, Prices Paid, Employees, and inventories all cliff-dived with New Orders falling the most YoY since the Great Recession.

"Unequivocally terrible."

The Fed's hubris has led it to the Dark Side.

When last we checked in on Puerto Rico’s seemingly intractable debt debacle, Governor Alejandro Garcia Padilla was busy using an absurd revenue clawback end-around to avoid defaulting on $273 million in GO debt. On Friday, we get the latest out of Puerto Rico and the news is ... well, good we suppose. PREPA - Puerto Rico’s power authority - has reached a restructuring agreement with bondholders and insurers to refinance some $9 billion in debt via securitization.

Just in case yesterday's weakness was mistaken for "well, it's just stabilizing before the next leg higher," US equity markets are pooping the bed this morning with the Dow down over 500 points from its post-Yellen highs, FANGs plunging red, credit collapsing, and bond yields slumping. Between the widely watched quad-witching, Fed policy error concerns, and the utter failure of the Bank of Japan's efforts to save the world, global stocks and bonds are flashing red warnings for the end of centrally planned markets.

“I have a feeling that they will not pay us back because they are crooks.”

While correlation is not causation, one would have to be an ignorant unicorn-worshipper to believe that a collapse in America's manufacturing would not have some follow-through. Following the crash in Manufacturing, Markit reported America's Services economy massively missed expectations and plunged to 53.7, lowest since Dec 2014. New orders plunged to the lowest since January 2015 and employment tumbled. As Markit reports, this is "disappointing  news  for  an  economy which  has  seen the first  US  interest  rate  hike  for almost  a  decade."

On Friday we get still more evidence that the West is begrudgingly coming to terms with the fact that Assad will be sticking around for the foreseeable future in Syria, as Bild (citing anonymous sources) says German spies have been "cooperating" with Assad for "some time" and are set to establish an intelligence cell in Damascus.

Weak earnings performance in marketing operations below the current EBIT guidance of $2.4-$2.7 billion could place negative pressure on the Baa3 ratings in the absence of any mitigating measures. A weakening of the company's liquidity position, delays with the planned divestments in 2016 or a material reduction in its working capital funding capacities by the banks, as well as sustained high leverage with adjusted debt/EBITDA exceeding 4x, will also put negative pressure on the Baa3 ratings."

"The interest of firms in both borrowing and spending continues to decline, suggesting it’s past time the ‘stimulus mafia’ rethinks its Pavlovian responses. Reform or bust."

Not since December 2013 have Canadian Consumer Prices dropped by such a large amount. November CPI dropped 0.3% MoM, dramatically worse than expected to the largest drop since Dec 2013. The largest YoY drop in Canadian CPI, amid a surge in inventories relative to a collapsee in wholesale sales sent the loonie crashing above 1.4000 for the first time since August 2003.

For a brief few minutes, overnight saw exactly the reaction that central planners had hoped for when The Bank Of Japan announced it would buy 'moar' stock ETFs and extend bond duration buying ad nauseum. However, within just 15 minutes something happened that we haven't seen since the world embarked on this experimental nightmare. Despite the front-ran promises to buy Japanese stocks "whatever it takes" traders sold... and sold large.

• Oil heads for third straight weekly loss as supply weighs (Reuters)
• BOJ's $2.5 Billion ETF Boost Seen Having Little Impact on Stocks (BBG)
• Japan core CPI seen flat in November, household spending down (Reuters)
• Dollar gets altitude sickness as BOJ disappoints (Reuters)
• Fed Hikes, but Some Rates Veer Lower (WSJ)
• White House calls for 'common sense steps' to help Puerto Rico (Reuters)

Following the latest BOJ statement, the market found itself wrongfooted assuming the BOJ was actually launching another episode of easing, sending the USDJPY soaring, until suddenly the realization swept the market that not only was the incremental action not really material, but even Kuroda spoke shortly after the announcement, confirming that "today's decision wasn't additional easing." The result was one of the biggest FX headfakes in recent days, perhaps on par with that from December 4 when EUR shorts were crushed, as the biggest carry pair first soared then tumbled and since the Yen correlation drives so many risk assets, also pulled down not only Japanese stocks but US equity futures.