- Ruble Sinks to 80 a Dollar Defying Surprise Russia Rate Increase (BBG)
- Oil slumps near $59 for first time since 2009 on oversupply (Reuters)
- Oil sinks, Russian moves fail to quell nerves (Reuters)
- Fed Seen Looking Past Low Inflation to Drop ‘Considerable Time (BBG)
- Students Among Dead as Pakistan Gunmen Kill 126 at Army School (BBG)
- Repsol to buy Talisman Energy for $13 billion (Reuters)
- Indonesia’s Rupiah Erases Decline After Central Bank Intervenes (BBG)
- Anti-Islam Rally Grows as Immigrant Backlash Hits Europe (BBG)
- Saudi Arabia is playing chicken with its oil (Reuters)
The Sellside Reacts: "17% Rate Hike Not Enough" According To Citi, JPM; Goldman Positive: "Removes CBR Uncertainty"Submitted by Tyler Durden on 12/15/2014 23:00 -0500
A few short hours ago Russia shocked everyone with an unprecedented rate hike sending the nation's various interest rates some 650 bps higher. Well, according to the initial sellside responses from Citi and JPMorgan, as shocking as the move was, it is not nearly enough. Goldman is more positive, suggesting this move removes key uncertainty about CBR's willingness to stabilize RUB volatility.
Following the biggest rout to the Ruble in ages, Russia - unlike Mario Draghi - instead of talking the talk decided to walk the bazooka walk and shocked all those long the USDRUB by unleashing an emergency rate hike (at 1 am in the morning) from the recently raised interest rate of 10.50% to... hold on to your hats... 17.00%, a 650 bps increase!
It's jolly good fun to discuss alternatives to the doomed status quo, but what choice do most of us have to participating in the current system, even if we loathe it? The lack of choice is of course a key characteristic of the status quo-- if alternatives were plentiful, how many would opt out of Corporate America and the Financial Nobility's manor house of debt servitude?
After the worst week for stocks in years, and following a significantly oversold condition, it will hardly come as a surprise that the mean reversion algos (if only to the upside), as well as the markets themselves (derivative trading on the NYSE Euronext decided to break early this morning just to give some more comfort that excessive selling would not be tolerated) are doing all they can to ramp equities around the globe, and futures in the US as high as possible on as little as possible volume. And sure enough, having traded with a modestly bullish bias overnight and rising back over 2000, the E-Mini has seen the now traditional low volume spike in the last few minutes, pushing it up over 15 points with the expectation being that the generic algo ramp in USDJPY ahead of the US open should allow futures to begin today's regular session solidly in the green, even if it is unclear if the modest rebound in the dollar and crude will sustain, or - like on every day in the past week - roll over quickly after the open. Also, we hope someone at Liberty 33 tells the 10Y that futures are soaring: at 2.13% the 10Y is pricing in nothing but bad economic news as far as the eye can see.
One thing is certain about the ensuing “race to the bottom”. Japan’s retirement colony will end up with the hindmost. And they will surely burn professors Krugman and Summers in effigy—-even if driftwood is the only fuel they have left.
"Anything that becomes a mania -- it ends badly," warns one bond manager, reflecting on the $550 billion of new bonds and loans issued by energy producers since 2010, "and this is a mania." As Bloomberg quite eloquently notes, the danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt - as HY energy spreads near 1000bps - all thanks to the mal-investment boom sparked by artificially low rates manufactured by The Fed. "It's been super cheap," notes one credit analyst. That is over!! As oil & gas companies are “virtually shut out of the market" and will have to "rely on a combination of asset sales" and their credit lines. Welcome to the boom-induced bust...
After years of exposing, month after month, the truth about the US labor market - its conversion into a part-time (in 2010!), low-paying job market where Millennials refuse to work (as the job market reality is gruesome so instead they opt to load up on record amount of student loans) and where older Americans, instead of enjoying retirement are forced right back into the labor force leading to record numbers of workers over the age of 55 (thanks to ZIRP crushing the value of their savings and a refusing to participate in an HFT- and central-bank rigged stock market), the mainstream media, having tired of spinning the bullshit optimistic propaganda, has finally moved to the "tinfoil" side, and has done something it normally wouldn't touch with a ten foot pole. Tell the truth.
Anyone who was hoping the market would rebound on last-minute news that the US government has gotten funding for another 9 months, will be disappointed this morning, when futures are finally starting to notice the relentless decline in crude, and with Brent down another 1% as of this writing following yet another cut in the forecast of Global oil demand by the IEA (the 4th in the last 5 months) and with Chinese industrial production also missing estimates (recall that the Chinese slow-motion hard landing has been said by many to be the primary catalyst for the crude collapse) which however pushed Chinese stocks higher on hopes of even more stimulus, the S&P is trading lower by some 14 points, the 10 Year is in the red zone at 2.12%, and the USDJPY is close to session lows. In short: Kevin Henry's "ETF" desk at the NY Fed will have its work cut out to generate one of the now traditional pre-weekend feel good, boost confidence stock market ramps.
Sometimes I wish I could just passively accept what my government monarchs and their mainstream media mouthpieces feed me on a daily basis. Why do I have to question everything I’m told? Life would be much simpler and I could concentrate on more important things like the size of Kim Kardashian’s ass... The willfully ignorant masses, dumbed down by government education, lured into obesity by corporate toxic packaged sludge disguised as food products, manipulated, controlled and molded by an unseen governing class of rich men, and kept docile through never ending corporate media propaganda, are nothing but pawns to the arrogant sociopathic pricks pulling the wires in this corporate fascist empire of debt.
The central banks are now out of dry powder - impaled on the zero-bound. That means any resort to a massive new round of money printing can not be disguised as an effort to “stimulate” the macro-economy by temporarily driving interest rates to “extraordinarily” low levels. They are already there. Instead, a Bernanke style balance sheet explosion like that which stopped the financial meltdown in the fall and winter of 2008-2009 will be seen for exactly what it is—-an exercise in pure monetary desperation and quackery. So duck and cover. This storm could be a monster.
Just 2 short months ago we noted S&P's warning that Greece will default again within 15 months and following comments by Prime Minister Samaras that the market's drop is due to fear that Syriza will win an early election and seek a Greek exit from the Euro. Pressuring parliamentarians and the public alike, he stated "the choice is simple," warning that Greek financing needs are only covered through the end of February without further aid from the EU (but we thought they were 'recovered'). Greek stocks have crashed further, Greek default risk has spiked, and 3Y bond yields are now well north of 10% (138bps inverted to 10Y).
For the first time in almost 3 years, the 'market' is fighting the PBOC in the FX markets. The last month has seen USDCNY rise almost 9 handles to as high as 6.21 (the weakest CNY in 5 months). At the same time, the PBOC's official 'fix' of CNY has been strengthened to below 6.12 (the strongest CNY in 9-months) diverging by the most in six months from the market. "The market is staying cautious and even bearish on the China macro outlook," notes Morgan Stanley, but as HSBC explains, "China doesn't want to join the currency wars [and wants to stall any speculation on trend] and that explains the fix movement." Simply put, markets doubt the PBOC and believe it will eventually be dragged into the currency war or just fundamentally deteriorate enough to warrant capital flight.
The rather amusing and broadly cited economic fact is that US growth has become more robust and we should only expect a “tailwind” from lower gas prices that will put more dollars in the US consumers’ pockets , but 3 charts might indicate a less optimistic outcome.
We are now far advanced into the third central bank generated bubble of the last two decades, but our monetary politburo has taken no notice whatsoever of its self-evident leading wave. Namely, the massive malinvestments and debt mania in the shale patch.