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Market Recap: 11.23.2010
A summary of the day's key events in equities, vol, FX, rates, commodities, credit, insider trading, corruption, monetary manipulation, racketeering, prostitution, and a forecast of tomorrow's market travesty.
- Equities opened lower this morning in NY and traded in the red all day. When the dust settled the S+P was down 1.4% to just under 1181. Today the catalysts were the geopolitical tensions in Korea as well as continued concerns over European debt. Overall flows were light with most of the selling in the higher beta sectors. All 10 S+P subsectors were down on the day with energy stocks doing the worst. Not surprisingly EM stocks did worse than DM stocks as the QE2 trades continue to be unwound (more on this in the FX section). For the technicians amongst you, the next key level is in the low 1170’s which is both last week’s intra-day low as well as the 50 day moving average.
- The VIX gapped higher on the Korea news overnight, though pared some gains into the close to end up +2.22 at 20.59.
- In FX the theme today was EURO pain. Lots of it. EURUSD drops nearly 2% today. That’s 3% since yesterday’s high, a new cycle low, and the second largest daily decline for the year. What’s most interesting: we actually found good buying interest in EURUSD and EURJPY. On a 2% down day, buyers are usually few and far between. Elsewhere in the world of FX, USDKRW unwinds continue, though a few found the modest courage needed to fade the move via 1x2 put spreads and RKOs. USDJPY briefly traded below 83.00 but bounced off its 55d following a weak 5y auction. Bottom line is that there was nowhere to hide today as we got another reminder that complacent QE2 trades remain at risk.
- The rates market began the day on a firm tone on the back of the risk asset sell-off overnight. Worries out of Europe and Korea helped the market rally about 8.5bps from yesterday’s closing levels before we began to see some outright concession going into the $35bn 5yr auction. The auction came weaker than expected clearing at 1.411% (2.3bp tail), sapping the market out of its positive momentum. The FOMC minutes didn’t do much either way and we saw fast money taking profits on longs in intermediates. Tomorrow brings the 7yr auction which should be particularly tricky given the weakness in 5yr supply today and the fact that we still have a week to go before the end of the month making it harder to match off any flows against potential month end extension flows.
- In commodities, gold rallied the most it has in 2 weeks, ending up 1.5% on the day. Silver was up a more modest 0.4%. Interestingly, precious metals held their ground even as the dollar gained. We long-rolled gold for clients in good size. Energy was down today except for gasoil, up .3%, as concerns over Eurozone debt troubles outweighed stronger refinery demand, and the stronger dollar weighed down the complex. All eyes are on inventories tomorrow, which look like they are set for a third weekly draw. Cotton was limit down for the 3rdday in a row today, the decline exacerbated by news that India may boost exports due to a 27% rise in output. Grains held their ground despite dollar strength – soybeans were up 1.4% and corn up 2.6%. We bought some wheat and also long-rolled into next year for numerous clients
- Credit opened wider following the news out of Korea and continued to selloff on continued concerns over credit in Europe, poor performance in equities, and FOMC comments that were more negative than expected. We saw continued decompression between HY and IG with some outflows leading to a 0.5 pt move lower in the HY index in the last hour of trading, though the move occurred on low volume. HY closed down 1.25 points to 99.25 and IG closed 4.5 points higher at 95.5.
- Pretty much every single hedge fund ever was found to be a fraud and an insider trading abetted scheme. 3 and 50 is dead. 2 and 20 is on its death bed. Soon everyone will be forced back into mutual funds to make up for the over 6 months of outflows from mutual funds.
- The Fed minutes came out today. Here is the bottom line from GS ECS: Text of minutes to the Nov 2-3 meeting, at which the FOMC decided to purchase $600bn in Treasury securities, contains few surprises around a general theme that progress in reducing unemployment has been disappointing and that inflation is too low. FOMC forecast changes reflect this judgment on unemployment with substantial upward revisions in the level of the jobless rate and downgrades to near-term (2010 and 2011) growth; however, inflation forecasts are actually slightly higher. However, in a conference call meeting three weeks earlier, the committee apparently discussed a variety of different strategies, ranging from changes in modes of communication to alternative frameworks such as targeting price levels, inflation, or longer-term interest rates, though with no decisions taken at that session.
- Tomorrow brings US durable goods, core PCE, Michigan consumer sentiment, new home sales; German IFO Business Survey; UK GDP; and Euroland manufacturing orders.
From GS and ZH (not, per se, in collaboration)
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Things are never as they seem
1. Summary Of All Overnight Developments Out Of Europe As Spanish 10 Year Bond Spreads Hit All Time Wides http://www.zerohedge.com/article/summary-all-overnight-developments-out-europe-spanish-10-year-bond-spreads-hit-all-time-wide
2. European Bloodbath Intensifies As Spanish Bond Yield Hits All Time Highs, EURUSD On Verge Of Going Bidless http://www.zerohedge.com/article/european-bloodbath-intensifies-spanish-bond-yield-hits-all-time-highs-eurusd-verge-going-bid
3. On That Accelerating Irish Bank Run... http://www.zerohedge.com/article/accelerating-irish-bank-run
4. Goodbye reserve currency: Yuan begins trading against the rouble (China Daily) this is big news http://www.chinadaily.com.cn/bizchina/2010-11/23/content_11594595.htm
5. Insider trading scandal http://www.zerohedge.com/article/sac-discloses-government-subpoena
6. TSA issue. Keep it front page.
7. China orders N. Korea to create a disturbance. The Sleight of hand. I'll do a Denninger - "Wake up Folks"
8. The end result. Redistribution of wealth and new IMF world control. Dollar dead. http://ftalphaville.ft.com/blog/2010/11/22/411951/bernanke-hints-dollar-...
Robo. Nice charts as always. OIL um? got lots of January call in DBC but not sure this will be a good trade. My biggest belief is that corporate bonds lick the ass. Have lots of puts on HYG. History says I will be right. But who knows. I may take it in the ass myself. Thanks
TD posted a comment on one of his threads. It stated, reading stories is a value added concept. Quote is not in TD's words, but mine.
ReDeCoupling: The Gift That Keeps On Giving
http://www.zerohedge.com/article/redecoupling-gift-keeps-giving#comments
Econoparody: The Dollar and Its Diving
http://www.nakedcapitalism.com/2010/11/econoparody-the-dollar-and-its-diving.html
The global economy is again turning to a salvage operation by the US Fed and its minions. But it's getting harder because they're running out of fingers to stick in all the leaking holes in the dyke. ;) But the attitude (as reaffirmed by the FOMC minutes today) is to keep the dollar snowblower running on every continent. North Korea's gonna cost us a pretty penny (watch as we send a delegation with a suitcase full of bills and once again they shut up).
Biggest news of the day: Fed surpasses China to become US Treasury's largest creditor. !!! WoooHooo!!! We're gettin giddier and giddier!!! Money's just sprouting from everywhere!!! Rock on!!!!
ZH
"A summary of the day's key events in equities, vol, FX, rates, commodities, credit, insider trading, corruption, monetary manipulation, racketeering, prostitution, and a forecast of tomorrow's market travesty..."
a sign of growing evolution/maturity ("stage of acceptance") that THIS can be said, in THIS MANNER, without need for further comment...
HA HA HA, (Finland) 'Angry Birds' starting to win, in their battles against the PIGS...
http://www.goodnewsfinland.com/archive/cnet-chooses-angry-birds-as-the-b...
From GS and ZH (not, per se, in collaboration)
thanks for the disclaimer, i don't blame you.
Also in today's equity events, CSCO made a new 52 week low. Pulte Home Builder (PMH) made a new 52 week low ahead of tomorrow's 10 a.m. new home sales number. GS closed near its low of the day, down $3.27, while BAC trading 200 million shares, was down $0.21 to just a few cents above its 52 week low. After being ramped prior to the GM ipo, TTM dropped $1.39 today, while F was down $0.50 (or 3.09%). Disney (DIS) which I shorted against $37, was down $0.83 to $36.12. I haven't seen a statement from them on the kiddie airport molestations, but the airport in Orlando has apparently told the tsa that they are persona non grata starting in January.
Did you hear about the TSA guy caught masturbating in Chicago when a group of athletes were going through the scanner? Put the airport on lockdown...
Of all places, it's on failblog.org. No joke.
That story first appeared in the daily squib which is a satire newspaper. The story wasn't real but who would be surprised if it was?
Here's their latest story on the airport molestations ---
DALLAS - USA - Whilst most Americans are now thinking twice about getting on a plane due to the new TSA groping rules, sexual perverts are now buying air tickets like crazy.
http://www.dailysquib.co.uk/?c=117&a=2536
My bad. Looked real enough and was definitely believable.
Only recap you'll need overnight:
China, Russia quit dollar on bilateral trade08:22, November 24, 2010
China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday in St. Petersburg.
Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.
"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.
The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.
The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.
"That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said.
Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.
The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communiqu. Details of the documents have yet to be released.
Putin said one of the pacts between the two countries is about the purchase of two nuclear reactors from Russia by China's Tianwan nuclear power plant, the most advanced nuclear power complex in China.
Putin has called for boosting sales of natural resources - Russia's main export - to China, but price has proven to be a sticking point.
Russian Deputy Prime Minister Igor Sechin, who holds sway over Russia's energy sector, said following a meeting with Chinese representatives that Moscow and Beijing are unlikely to agree on the price of Russian gas supplies to China before the middle of next year.
Russia is looking for China to pay prices similar to those Russian gas giant Gazprom charges its European customers, but Beijing wants a discount. The two sides were about $100 per 1,000 cubic meters apart, according to Chinese officials last week.
Wen's trip follows Russian President Dmitry Medvedev's three-day visit to China in September, during which he and President Hu Jintao launched a cross-border pipeline linking the world's biggest energy producer with the largest energy consumer.
Wen said at the press conference that the partnership between Beijing and Moscow has "reached an unprecedented level" and pledged the two countries will "never become each other's enemy".
Over the past year, "our strategic cooperative partnership endured strenuous tests and reached an unprecedented level," Wen said, adding the two nations are now more confident and determined to defend their mutual interests.
"China will firmly follow the path of peaceful development and support the renaissance of Russia as a great power," he said.
"The modernization of China will not affect other countries' interests, while a solid and strong Sino-Russian relationship is in line with the fundamental interests of both countries."
Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a "fair and reasonable new order" in international politics and the economy.
Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.
Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents.
Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government.
He left St. Petersburg for Moscow late on Tuesday and is set to meet with Russian President Dmitry Medvedev on Wednesday.
http://english.peopledaily.com.cn/90001/90778/90859/7208907.html
China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday in St. Petersburg.Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.
"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.
The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.
The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.
"That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said.
Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.
The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communiqu. Details of the documents have yet to be released.
Putin said one of the pacts between the two countries is about the purchase of two nuclear reactors from Russia by China's Tianwan nuclear power plant, the most advanced nuclear power complex in China.
Putin has called for boosting sales of natural resources - Russia's main export - to China, but price has proven to be a sticking point.
Russian Deputy Prime Minister Igor Sechin, who holds sway over Russia's energy sector, said following a meeting with Chinese representatives that Moscow and Beijing are unlikely to agree on the price of Russian gas supplies to China before the middle of next year.
Russia is looking for China to pay prices similar to those Russian gas giant Gazprom charges its European customers, but Beijing wants a discount. The two sides were about $100 per 1,000 cubic meters apart, according to Chinese officials last week.
Wen's trip follows Russian President Dmitry Medvedev's three-day visit to China in September, during which he and President Hu Jintao launched a cross-border pipeline linking the world's biggest energy producer with the largest energy consumer.
Wen said at the press conference that the partnership between Beijing and Moscow has "reached an unprecedented level" and pledged the two countries will "never become each other's enemy".
Over the past year, "our strategic cooperative partnership endured strenuous tests and reached an unprecedented level," Wen said, adding the two nations are now more confident and determined to defend their mutual interests.
"China will firmly follow the path of peaceful development and support the renaissance of Russia as a great power," he said.
"The modernization of China will not affect other countries' interests, while a solid and strong Sino-Russian relationship is in line with the fundamental interests of both countries."
Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a "fair and reasonable new order" in international politics and the economy.
Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.
Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents.
Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government.
He left St. Petersburg for Moscow late on Tuesday and is set to meet with Russian President Dmitry Medvedev on Wednesday. http://english.peopledaily.com.cn/90001/90778/90859/7208907.html
dammit, i was tryin to focus on dancing with the stars and now this. thanks for the link. it's major.
Hope you didn't miss Christina Aguilera bringing down the house. Great television.
_________
P.S. It's not that major. What the article, from my brief perusal, fails to mention is that this is (only...) a fifty billion dollar FX swap line. The Chinese have done the same with Brasil and other South American countries. Instead of a challenge to dollar hegemony, it is more of a rapid-transfer account so they can get paid quicker.
Man, Christina was awesome.
:D
yes indeed. her performance was awesome. i was rooting for bristol, because she's a cubette, but oh well, she still did good.
She just couldn't let that sex appeal out. She's a beautiful girl, though.
Notice lame-o Michael Bolton didn't even bother to show up. What a whiner.
tl;dr
TF
http://99ercharts.blogspot.com/2010/11/tf_5542.html
http://www.zerohedge.com/forum/99er-charts
http://www.engrish.com//wp-content/uploads/2010/05/titty.jpg
I need some geniuses here to answer some questions about QE 2.0.
What would happen to the value of USTs if deflation takes hold?
What would happen to the value of USTs if deflation takes hold and The Fed was able to extract excess dollars off the world market by reverse repos or some other mechanism?
What would happen to the value of USTs if inflation continues unabated and their was a shortage of dollars by the above mentioned hypothetical mechanisms? Is this possible (for instance if commodities are withheld off the world market by third party traders)?
is there a shift in the QE trade or just some profit taking so people can kick back for the holidays know a tasty bonus is on the way?