If yesterday stocks surged on the worst 4-month stretch of missing retail sales since Lehman, one which BofA with all seriousness spun by saying "it seems not unreasonable to suspect that the March 2015 reading on retail sales gets revised up next month", then the reason why futures are now solidly in the green across the board even as German Bunds have just 14 bps to go until they hit negative yields and before the ECB is fresh out of luck on future debt monetization, is that overnight China reported its worst GDP since 2009 together with economic data misses across the board confirming China's economy continues its hard landing approach despite a stock market that has doubled in the past year.
- As reported here first a month ago: The $9 Trillion Short That May Send the Dollar Even Higher (BBG)
- As an instant target for foes, Clinton may struggle to get message heard (Reuters)
- Emerging Stocks Rally 11th Day as Aussie Weakens on China (BBG)
- Puerto Rico, Investors Enlist Ex-IMF Officials (WSJ)
- Dollar’s Rise Reshuffles Global Economy (BBG)
- Indonesia eyes regular navy exercises with U.S. in South China Sea (Reuters)
- Banca Monte dei Paschi Breaches Exposure Limits to Nomura (WSJ)
- European Bond Buyers Find Negative Doesn’t Necessarily Mean Bad (BBG)
The US dollar has been even stronger than this bull thought let alone the perma-bears. Here's why,
For the third month in a row, FX 'traders' in AUD "guessed" the Reserve Bank of Australia's decision in the seconds before it was released to the public. Aussie regulators, seemingly furious at the blatant-ness of the front-running, confirmed they will be investigating the price spike overnight...
Yesterday it was only the US that got the full benefit of the market-wide stop hunt that sent the US market soaring on its biggest opening ramp in 2015 following the worst payroll data since 2013, because Europe was closed for Easter Monday. Which means today it was Europe's turn to celebrate atrocious US data (yes, yes, snow - because somehow tremendous January and February jobs data was not impacted by snow), and in the first European trading session of the week, equities have started off on the front-foot.
A dispassionate look at the drivers of the investment climate in the week ahead.
Even before the disappointing US jobs data, we anticipated a downside correction in the dollar after a sharp advance in Q1.
A non-bombastic look at the week ahead in the capital markets.
The US Dollar took down Oil, commodities, even emerging market currencies. Stocks will be next. The first REAL sign that the 2008 Crash was coming occurred when the US Dollar began to skyrocket in the summer of 2008.
The Fed and other Central Banks are trying to maintain the illusion that they have everything in control by talking about interest rates, but the reality is that the US Dollar carry trade is ABOVE $9 trillion in size. That is almost as large as ALL of the money printing that occurred between 2009 and 2013.
The bust of Aussie boom-towns, collapse of the mining industry, dramatic capital outflows, and a bursting housing bubble all have one thing in common, according to billionaire hedge fund manager Crispin Odey - "China is everything to Australia in lots of ways." Simply put, he tells The Australian Financial Review, economies dependent on China for income, including Australia, are headed for recession and central banks will not be able to able to come to the rescue because they have exhausted the arsenal of policy weapons. "We've got a very old-fashioned recession which is spreading across the world," and Australian banks face a tough time ahead too because there are indications bad debt risks are rising.
No catalyzing event - China CPI modestly hotter than expected and Aussie confidence weak - but FX markets are fast in the Asia session with USDJPY surging above 122.00 for the first time since July 2007 and EURUSD dropping below 1.08 as USD strength dominates (up 1.65% from payrolls). Japanese stocks have decoupled from USDJPY's rally and are down notably and despite the USD strength, WTI crude has jumped (perhaps on news of Iraqi forces taking back an oil field near Tikrit). Gold is falling as Offshore Renminbi weakens. All in all - markets are turmoiling for no good reason...
Hedge funds are still useful for one thing: observing where the fast money herd is parked, and doing precisely the opposite in advance of the herd dispersing. Because in a market as illiquid as this one, any and all fast, sudden moves by even the smallest group of traders results in dramatic price movement outliers.