If trained professionals (in West Africa and the US) are becoming infected by the deadly Ebola virus, what hope is there for fellow passengers in a tightly-packed metal tube? The World Health Organization expects Ebola cases to top 9000 this week and deaths to exceed 4500 as they shockingly note 427 healthcare workers are now infected. The economic impact of Ebola continues to rise as Liberia slashes its GDP estimate and East African nations discuss strategies to stop the spread from the West. In Europe, Germany is sending aid, the Spanish nurse is stable but Madrid airport activated emergency measures due to a suspected Ebola passenger. US screening restrictions increase as Yale New Haven Hospital is dealing with a patient with Ebole-like symptoms. Politicians begin debating travel bans as Dallas is expected to approve a "state of disaster" today. Contained?
The last time Industrial production growth was higher than this was May 2010 as IP rose 1.0% against expectations of a 0.4% rise. Last month's print was revised lower, so we swung from worst in 2014 to best in 4 years. Manufacturing rose at a modest 0.5% but it was Utilities that stole the show, surging 3.9% (due to unseasonably high demand for air conditioning). This is the biggest MoM surge in Utilities for a September in at least 10 years. Not exactly sustainable, unless we once again are at the mercy of the weather for US economic growth.
What's French for 'sacre bleu'? While the fundamental reality of France's record unemployment, plunging industrial production and economic growth, and treaty-busting deficits are all fact, for many months now, the 'market' has been convinced at Draghi's omnipotence and enabled French bonds to trade as if they are 'in the core'. But... on the heels of Sapin's slap in the face of Schaeuble, shunning of Brussels, the market appears to be changing its mind about France's credit worthiness (risk is up over 30% in the last week). Across Europe, we are witnessing a 2012 replay as re-denomination risk rises and risk spreads between the periphery (which means everything but Germany) and Germany surge...
When it comes to levitating the stock market, and allowing America's worthless politicians to keep on doing nothing in hopes the Fed can fix everything by simply printing money, the Fed's Chairmanwoman has no problem with getting to work. However when it comes to the latest deadly Pandemic to cross the Atlantic and hit US shores, the Fed has a dire message: America, you are on your own.
- FED'S PLOSSER: MONETARY POLICY CANNOT DO MUCH ABOUT ECONOMIC THREAT FROM EBOLA
You mean, the Fed can't print antibodies? And why is the Fed expected to do "much" or anything for that matter about the economic threat from Ebola - isn't there a president and a Congress to actually deal with America's problems... instead of just making them worse that is?
If you thought the last several days were volatile in the market, you ain't seen nothing yet: judging by the early liquidity, or rather complete lack thereof, in the market moving E-Mini contract, the asset class through which as we disclosed a month ago central banks directly manipulate markets with the CME's blessing, then we urge all those who have stop losses close to the NBBO to quietly pull those as they will get hit adversely. The reason? As this Nanex chart of ES orderbook levels show, there is zero, zilch, nada liquidity in the ES.
As we noted last week, when there is no hiring, there is no firing and so it is that initial jobless claims collapsed to 264k this week (versus 290k expectations) - the lowest since April 2000 (and 2nd lowest ever on record). That is not what the market wants to hear right now... it is craving bad news to get The Fed re-engaged. Continuing claims inched higher from 2.382 million to 2.389 million but remains near cycle lows. To sum up: its never been better than this for employment... according to the government-supplied data.
Forward inflation expectations for Europe have collapsed to all-time record lows (based on 5Y forward implied 5Y inflation) as the market grows increasingly impatient at Draghi's dragging his "whatever it takes" feet on pulling the sovereign QE trigger. With 8 European nations now in outright deflation, the growing political pressure on the ECB to actually "do" something is, however, equal and opposite to Germany's (read Buba's) insistence that member states have some fiscal discipline (oh and the fact that OMT may just be exactly what we always said it was - illegal and a mirage).
Despite the substantial beat in Goldman revenues and EPS, average employee comp actually fell modestly to $385,821 in Q3, although Goldman did boost total headcount from 32,400 to 33,500 in the third quarter, bucking the layoff trend seen at every other bank.
- Dallas County May Declare State of Disaster From Ebola Virus (BBG)
- Markets on edge after worst turmoil in four years (Reuters)
- Central bankers may have no quick fix as markets swoon, economy weakens (Reuters)
- Risk of Deflation Feeds Global Fears (Hilsenrath)
- U.S. health official allowed new Ebola patient on plane with slight fever (Reuters)
- Texas Hospital Fights Allegations About Ebola Protocols (BBG)
- Treasuries Gain as Oil Drops Below $80 While Stocks Slide (BBG)
- Greek Bonds Slump on Bailout Concern as Spain Misses Sale Target (BBG)
- White House shifts into crisis mode on Ebola response (Reuters)
- Obama Confronts Slippery Slope as Islamic State Advances (BBG)
Yesterday afternoon's "recovery" has come and gone, because just like that, in a matter of minutes, stuff just broke once again courtsy of a USDJPY which has been a one way liquidation street since hitting 106.30 just before Europe open to 105.6 as of this writing: U.S. 10-YEAR TREASURY YIELD DROPS 15 BASIS POINTS TO 1.99%; S&P FUTURES PLUNGE 23PTS, OR 1.2%, AS EU STOCKS DROP 2.54%.
Only this time Europe is once again broken with periphery yields exploding, after Spain earlier failed to sell the maximum target of €3.5 billion in bonds, instead unloading only €3.2 billion, and leading to this: PORTUGAL 10-YR BONDS EXTEND DROP; YIELD CLIMBS 30 BPS TO 3.58%; IRISH 10-YEAR BONDS EXTEND DECLINE; YIELD RISES 20 BPS TO 1.90%; SPANISH 10-YEAR BONDS EXTEND DROP; YIELD JUMPS 29 BPS TO 2.40%.
And the punchline, as usual, is Greece, whose 10 Year is now wider by over 1% on the session(!), to just about 9%.
Presented with no comment...
"We hope that our partners will realize the futility of attempts to blackmail Russia and remember what consequences discord between major nuclear powers could bring for strategic stability." - Putin
It appears the "Fed is ending QE because the economy is recovering" narrative is failing (as the world wakes up to the fact that The Fed is being forced to exit due to having broken the markets). In the September FOMC meeting, Yellen put the final nail in the QE coffin by confirming the money-printing would end in October. This is what has happened since then...
The current Ebola outbreak, unlike others throughout history, is lasting a very long time; with cases now being reported on a variety of continents well outside of its equatorial African origin. We're not especially worried about Ebola striking me or my loved ones (for reasons we explain below). But we're growing increasingly concerned about government response to the outbreak. So let's spend some time understanding the nature of Ebola, specifically, and viral contagion, more generally. At the very least, Ebola can serve as an instructive reminder about how our society's responses to a viral outbreak could prove to be at least as disruptive and damaging as the virus itself.