Overnight Futures, FX Fireworks Threatens QE2 Rally
Futures (and their driver - AUDJPY) have been spooked overnight by a circulating think thank report which claims that an Ireland bailout package is coming on Tuesday. Coupled with another rumor of a Chinese rate hike (China now down 6% in last two days) means Brian Sack's cronies had a very busy night. ES plunged as low as 1193 before recouping a whole 12 points, and was down just 6 at last check. It appears that just like in the flash crash, one of the key correlation catalysts is the EURUSD, which once dropping below 1.36, all hell breaks loose. For today, Ireland may be a rumor. Next week it will be a fact. And not even the Fed will be able to halt a multi-trillion selling onslaught.
Here is what the key metrics looked like overnight:
More importantly here is the top in the Shanghai Composite: Beijing is woefully behind on creating its own Plunge Protection Team.
And here is a recap of the think tank report:
- could be similar to Greece in that it will be sufficient to remove Ireland from the market for up to 3 years- combined with an IMF and EU adjustment program.
- may seek a substantial British contribution to the program, probably via the €60-billion European Financial Stabilization Mechanism
- ECB may step up bond programme
At the end of the day, all of this can be brushed away. Remember - new mega POMO begins today. Brian Sack is now fully in charge of your stocks.