It had been a painfully quiet session in Asia (where Chinese levitation continues with the Shanghai Composite up another 0.6% oblivious of yesterday's rout in the US, because as we explained for China it is now critical to blow the world's biggest stock bubble) and Europe, where the only notable news as that for the first time in months the ECB had not increase the Greek ELA, keeping it at €80.2 billion on conflicting reports that Greek deposit withdrawals had halted even as Kathimerini said another €300MM had been pulled just yesterday, suggesting the ECB has reached the end of its road when it comes to funding nearly two-thirds of what Greek deposits are left in local banks. But the punchline came moments ago when Bloomberg reported that "Greece will likely miss a deadline for a deal with creditors by the end of the week as the two sides have made little progress during talks in recent days."
While yesterday most markets were closed and unable to express their concerns at the very strong showing of "anti-austerity" parties in Spain's municipal election from Sunday, then today they have free reign to do just that, and as a result European stocks are broadly lower, alongside the EURUSD which dripped under 1.09 earlier today, with Spanish banks among the worst performers: Shares of Banco Sabadell, Bankia, Caixabank and Popular were down 1.8 to 2.3% earlier this morning, and while the stronger dollar was a gift to both the Nikkei and Europe in early trading, after opening in the green, Spain's IBEX has since slid into the red on concerns of what happens if the Greek anti-status quo contagion finally shifts to the Pyrenees.
"Zero Hedge long ago gave up discussing corporate fundamentals due to our long-held tenet that currently the only relevant pieces of financial information are contained in the Fed's H.4.1, H.3 statements... it is flow not stock that matters" - Zero Hedge, January 2010
"If there were any lingering doubt, this week’s gyrations demonstrate neatly that it is central bank liquidity, not fundamentals, driving markets. It is the flow, not the anticipated stock, of QE which counts." - Citigroup, May 2015
Everything is better (and fixed) once you can print...
The last time large speculators were as aggressively buying silver as last week was September 1997. The net long non-commercial positioning in Silver futures, according to the CFTC rose almost 22,000 contracts last week to a 3-month high (which is closing in on the 'longest' since 2005). Gold, not be out-precious'd also saw major buying. Net speculative longs in gold added over 45,000 contracts - the most since July 2005 - lifting net long positions to their highest in 3 months. Perhaps, just perhaps, as Alhambra's Jeffrey Snider notes, this is due to Yellen putting the 'dollar' back on suicide watch.
The financial world today is now an island on its own – separated from the real economy, as can be seen by the paradox of record high valuation in the stock market coinciding with record low inflation, employment , productivity and no hope. There is asset inflation, but deflation in the real economy. When the world has been this long at the zero-bound, the misallocation, the inability to reform, and a toolbox without new tools creates a mandate for change. "I expect stocks to trade sideways for the balance of 2015 and have now sold all my fixed income, increased my gold exposure, and I’m looking to buy mining companies and overall to increase my exposure to commodities beyond the normal allocation."
The consequence of policies that exacerbate injustice, inequality and double-bind demands is a madness that will find a social and economic outlet somewhere, sometime.
Janet Yellen at the Federal Reserve believes that the partying on Wall Street and in the financial institutions may “lead to trouble”.
You’re talking about a joint economy of $16 trillion in which 30%-56% of the population is employed b the Government and the Government is shredding democracy and the legal system. The cultural reactions will have financial repercussions for years to come.
"Protesters hailing from as far away as Kansas City and New York City participated in a demonstration at McDonald's Oak Brook headquarters Wednesday, urging that hourly wages for the burger giant's front-line workers be increased to $15 an hour", the Chicago Tribune reports. Police estimated the crowd at about 2,000 people. Organizers had projected that upward of 5,000 would participate in the demonstration.
The big news overnight was neither the Chinese manufacturing PMI miss nor the just as unpleasant (and important) German manufacturing and service PMI misses, but that speculation about a rate hike continues to grow louder despite the abysmal economic data lately, with the latest vote of support of a 25 bps rate increase coming from Goldman which overnight updated its "Fed staff model" and found surprisingly little slack in the economy suggesting that the recent push to blame reality for not complying with economist models (and hence the need for double seasonal adjustments) is gaining steam, and as we first suggested earlier this week, it may just happen that the Fed completely ignores recent data, and pushes on to tighten conditions, if only to rerun the great Trichet experiment of the summer of 2011 when the smallest of rate hikes resulted in a double dip recession.
The consequences of economic stagnation are not limited to finance: stagnation is causing a social depression.
On the heels of pledging $46 billion in infrastructure aid to Pakistan, China is set to invest as much as $50 billion in Brazil including $10 billion on a cross-mountain railway that will connect Latin America's largest economy with Peru's ports in what Premier Li calls "a new road to Asia." The move is a dramatic example of China's growing foothold in what is ostensibly Washington's strongest sphere of influence.
"Do no evil..." that is part from the racist stuff, would appear to be Google's new meme as The Guardian reports the somewhat unbelievable fact that searches which include the racist slur “nigger” were shown to find the White House in Google Maps. “Some inappropriate results are surfacing in Google Maps that should not be, and we apologise for any offence this may have caused. Our teams are working to fix this issue quickly,” a Google spokesperson said, claiming that it had been experiencing “escalated attacks to spam Google Maps over the past few months”.
Futures Flat With Greece In Spotlight; UBS Reveals Rigging Settlement; Inventory Surge Grows Japan GDPSubmitted by Tyler Durden on 05/20/2015 07:00 -0400
The only remarkable macroeconomic news overnight was out of Japan where we got the Q1 GDP print of 2.4% coming in well above consensus of 1.6%, and higher than the 1.1% in Q4. Did it not snow in Japan this winter? Does Japan already used double, and maybe triple, "seasonally-adjusted" data? We don't know, but we do know that both Japan and Europe have grown far faster than the US in the first quarter.