I strongly suspect that Ms. Holmes' delusions that she's going to pull herself out of this mess will, at long last, be dismissed when the reaction she gets to this "3 for 1" offer is the sound of crickets.
On Thursday, the ECB will hold its fourth tender under the TLTRO-II (Targeted Long-Term Refinancing Operations) programme. A large take-up is expected. A poll published by Reuters had a median forecast of EUR 125bn net borrowing, with estimates as high as EUR 300bn. From a rates perspective, what matters is whether these funds will trigger flows into the bond or swap markets as banks set up carry trades.
European shares decline led by a plunge in Pearson shares, S&P futures were modestly in the green as Asian and EM stocks gained. The dollar rebounded against most major currencies after retreating 1.3% on Tuesday to the lowest in a month following Trump's "strong dollar" comments and halted a seven-day drop against the yen. "Everything is just a partial reversal of the price action yesterday," RBC Capital Markets currency strategist Adam Cole said.
Stocks, bond yields and the dollar fell on Tuesday, while gold rose as investors drew in their horns in response to comments on the dollar from U.S. President-elect Donald Trump and ahead of a speech on Brexit from British Prime Minister Theresa May.
The week ahead will be a busy one, with a plethora of events including the Davos shindig, where particular focus will be on Chinese President Xi Jinping, the first Chinese president to attend. China will also announce GDP on Friday, which also marks the inauguration of Donald Trump as the 45th US president. Tuesday brings Theresa May's long-awaited Brexit speech.
Sterling fell, equities slid, Chinese markets got a helping government intervention hand again, and gold climbed over concerns U.K. Prime Minister Theresa May is prepared to lead Britain out of the European Union’s single market and as the U.S. President-elect suggested other countries could break from the bloc.
"2016 has been a landmark year as we seem to have reached a point where the faster the plates are spun the more the unintended short-term consequences... the global financial system remains broken and extremely fragile. Secular stagnation trends are everywhere. The world has too big a debt burden for the current growth environment.."
With a flurry of political risk events over the coming months, and a new global focus on fiscal policy, Draghi needs to reassure market players that the ECB has more ammunition as well as laying to rest the taper talk that spooked bond markets this month.
If yesterday's session was marked by concerns about Fed tightening and rising long-end rates, today concerns about a hawkish Fed have subsided, with European, Asian stocks and S&P futures all rising amid speculation Federal Reserve policy will remain accommodative after yesterday's dovish comments by Fed vice-Chair Stan Fischer, as well as weak economic data helped push the US Dollar off its 7 month highs.
The key economic releases this week include industrial production on Monday, CPI on Tuesday, and housing starts on Wednesday. There are several scheduled speeches from Fed officials this week. The Beige Book for the November FOMC period will be released on Wednesday.
World stocks started the week in the red Monday as the dollar touched a 7-month high and U.S. and European government bond yields climbed to their highest since June following the Friday speeches by Eric Rosengren and Janet Yellen which hinted the Fed's next step could be to pursue a steepening of the TSY yield curve the same as the BOJ.
As the market's comatose trading range continues with no notable moves for nearly 40 consecutive days, there is some hope volatility may return after today's main event, the ECB's announcement due in just two hours, when Mario Draghi may surprise the market in either direction. As of today, the S&P500 has held in a band of 1.5% for 39 days, the narrowest ever for that length of time.
After yesterday's positive close in the Dow Jones, which hasn't had a losing day since July 7 and which took the series of consecutive green closes to 8 in a row - the longest stretch since 2013 - the index will look to lock in its 9th green day in a row with futures currently trading well in the green. It's not just the US - equities edged higher in Asia and Europe as positive earnings results from some of the world’s biggest companies countered concern the global economy is losing steam. The dollar strengthened while gold retreated.
After a head-scratching S&P500 rally - which not even Goldman has been able to justify - pushed stocks to new all time highs with seemingly daily record highs regardless of fundamentals or geopolitical troubles, overnight US equity futures dipped modestly, tracking weak European stocks as demand for safe haven assets including U.S. Treasuries and gold rises. Asian stocks outside Japan fall. Crude oil trades near $45 a barrel.
It appears as though the ECB has had enough of the thorn in its side that is Germany in this latest round of back and forth, and has taken to what it does best: jawboning. In an article published today in the Frankfurter Allgemeine Sonntagszeitung newspaper, executive board member Benoit Coeure writes a rambling article defending ECB's policies, tells Germany that the ECB is the reason for its economic success, and downplays the issues that any savers may be having under NIRP.
The biggest catalyst for overnight markets, first reported on this site, was the announcement by Kuwait that its oil workers had ended their strike which disrupted oil production in the 4th largest OPEC producer for 3 days cutting it by as much as 1.7 mmb/d, and had served to offset the negative news from the Doha debacle. Kuwait Petroleum also added that it would boost output to 3m b/d within 3 days, which in turn has pressured the price of oil overnight, and the May WTI contract was back to just over $40 at last check, sliding 2%. Not helping things was a very dejected Venezuela oil minister Eulogio Del Pino who said at a conference in Moscow that he sees oil prices returning to lows in 3-4 weeks if oil producers can't make a deal. For now the algos - and central banks - disagree.