Following today's two better than expected employment data points, it was only natural that the world's fastest revising bank would go ahead and promptly revise their forecast for tomorrow's NFP higher. Sure enough... "We are upgrading our forecast for tomorrow’s nonfarm payroll report to +125k, from +75k previously."
A few days ago we noted that the ECB may well be contemplating the monetary neutron bomb, which would see it lower rates to below zero, ushering in a Negative Interest Rate Policy. Today, Mario Draghi cut such speculation short promising the ECB has not discussed this. Yet one bank which certainly has is the Danish Central Bank, which just lowered its Discount Rate to 0%, joining China, England, the ECB, and, of course, Kenya in easing, but also went one step further and cut its deposit rate to negative 0.2%. Keep a note of this: NIRP is coming to a central bank, and shortly thereafter to a bank deposit branch, near you very soon.
After the manufacturing ISM printed in contractionary territory a few days ago, there weren't many high expectations for today's Non-manufacturing ISM number. Which is good: printing at 52.1, it was a miss to expectations of 53.0, and down from 53.7. This was the 3rd month in a row of drops, and the 3rd downside miss in the last 4 data releases. Spin: at least it was above 50. And also the employment number rose. Which of course is the last thing the market needs, because if NFP comes much better than expected tomorrow, kiss more NEW QE goodbye for a while.
After printing just under 6.20% on Monday, the Spanish 10 Year is back to satanic 6.66%. Time for another summit.
I understand the dream of the common socialist. I was, after all, once a Democrat. I understand the disparity created in our society by corporatism (not capitalism, though some foolish socialists see them as exactly the same). I understand the drive and the desire to help other human beings, especially those in dire need, and the tendency to see government as the ultimate solution to all our problems. That said, let’s be honest; government is in the end just a tool used by one group or another to implement a particular methodology or set of principles. Unfortunately, what most socialists today don’t seem to understand is that no matter what strategies they devise, they will NEVER have control. And, those they wish to help will be led to suffer, because the establishment does not care about them, or you. The establishment does not think of what it can give, it thinks about what it can take. Socialism, in the minds of the elites, is a con-game which allows them to quarry the favor of the serfs, and nothing more. There are other powers at work in this world; powers that have the ability to play both sides of the political spectrum. The money elite have been wielding the false left/right paradigm for centuries, and to great effect. Whether socialism or corporatism prevails, they are the final victors, and the game continues onward… Knowing this fact, I find that my reactions to the entire Obamacare debate rather muddled. Really, I see the whole event as a kind of circus, a mirage, a distraction. Perhaps it is because I am first and foremost an economic analyst, and when looking at Obamacare and socialization in general, I see no tangibility. I see no threat beyond what we as Americans already face. Let me explain…
The PBOC, the BOE and now the ECB all cut, and still futures are tumbling. This latest news however will certainly send futures soaring:
- KENYA CENTRAL BANK CUTS BENCHMARK RATE TO 16.5% FROM 18%
- KENYA INFLATION HAS FALLEN TOWARD SHORT-TERM 9% TARGET
However, the market response so far is remarkably tepid. Hopefully the one bank we are all waiting for: the Bank of Uganda, will follow suit and show everyone who's boss.
It is unclear if today's surprising beat in both ADP and, just released, Initial Claims, is supposed to set the stage for a much better NFP tomorrow, in order to justify the lack of QE, for at least a few more months, and to validate that Fed's ongoing silence even as the BOE, PBOC and ECB have all eased. What is clear is that after 6 weeks of misses, initial claims finally posted a beat, printing at 374K, better than expectations of 385K, and down from last week's 386K print which as always was revised upward to 388K. Those on EUC and Extended Benefits continued to decline with just under 30K dropping off the 99 week cliff. Finally, if indeed it is Bernanke's intention to telegraph that there will be no QE because the economy is, don't laugh, suddenly improving now, the market will be very, very unhappy.
Update: no LTRO 3. Newsletter writers who sell hope, prayer and magic are issuing refunds. Stock futures sliding fast.
We already know that the ECB broke is unspoken cardinal rule and cut rates below 1%. Will Mario Draghi also hint at what everyone who sells newsletters based on hope, prayer and magic is really hoping for: LTRO 3? Tune in and find out.
The ADP Private jobs report is out, and in June America allegedly created 176K private jobs, better than expectations of 100K, and up from last month's 136K revised print. What hasn't changed is the continued lack of correlation between the ADP and the NFP report, nor the ongoing deterioration in claims. More importantly, Obama's promise of doubling US exports in 5 years from 2 years ago may be in jeopardy, since of the 176,000K extra jobs created, a whopping 4K was in manufacturing, the rest, or 160,000K, was service jobs.
In continuing the quantum physics scramble of the past 48 hours in the aftermath of the potential Higgs Boson discovery which confirms mass exists (and will soon be blamed for America's obesity epidemic) we ask if three of the world's largest central banks eased and futures turned red, did three of the world's largest central banks actually ease? Because if today is any indication, either all the EURUSD-ES algos are being furiously shut down right now to prevent risk from being dragged far lower, or we have reached peak central planner intervention. In other news, the entire EURUSD ramp since last week's summit is now gone, which incidentally is just what Germany always wanted.
The global central bank market propping continues with the ECB following in the footsteps of the BOE and PBOC, and cutting its benchmark rate by 25 bps to 0.75%, and the deposit rate to 0%. EURUSD slides. In other news, today the BOE, PBOC and now ECB have all eased.... and ES is up a whopping 0.2%. Houston: we have a problem.
- Finland (which with Holland account for 50% of the Eurozone's AAA rated countries), just says "Ei" to stripping ESM subordination (Bloomberg)
- Libor Rate Scandal Set to Spread (WSJ)
- #ByeBarclays flashmob descends on bank (FinExtra)
- What is financial reform in China? (Pettis)
- Cities Consider Seizing Mortgages (WSJ)
- China Beige Book Shows Pickup Unseen in Official Data (BBG)
- China’s New Rules May Curb Credit Growth, CBRC Official Says (BBG)
- India Said to Pay in Euros for Iranian Oil Due to Rupee Hurdles (BBG)
- Wealthy Hit Hardest as France Raises Taxes (FT)
- Euro Bank Supervisor Faces Hurdles (WSJ)
Bank Of England Hikes QE By £50 Billion As Expected, As China Cuts Benchmark Rate In Surprising MoveSubmitted by Tyler Durden on 07/05/2012 - 06:06
While everyone was expecting the BOE to return back to QEasing with a £50 Billion increase in its asset purchase program(me), to a total of £375 billion, which is what just happened, the bigger news came 1 second before the BOE announcement, with China declaring it has cut benchmark interest rates as once again the fate of the whole world is in the hands of small groups of academics, promising each other bottles of Bollinger if they can only get the S&P500 over 1,400. In other words, once again small groups of people around the world sat down and conspired (perfectly legally) to manipulate global interest rates. No hearings are scheduled.
So much for the latest European bail out. Not even a full week after the last European dead of night summit, which supposedly "was different this time", and Spanish bond yields have already retraced virtually the entire move lower, and after sliding to as low as 6.1%, are now back to 6.62% as of this morning, 22 bps wider on the day, as a result of the now generic realization that nothing actually changed, and also following the latest abysmal and unsustainable (there's that key word again) auction out of Spain, which sold bonds due 2015, 2016 and 2022, even as its default risk is now wider than that of Ireland.