Bank Lending Survey
We suggest ECB President Mario Draghi has his work cut out for him today. As the entirely political catalyst for Greece's crescendo-like bailout capitulation, he will - we hope - be questioned long and hard on his actions over the last 2 weeks (and going forward) with regard the increasingly 3rd world nation. As Bloomberg's Richard Breslow notes, Draghi needs to help calm a still tense situation. The only way he can do this is with as much tranquility as he can muster, make sure everyone knows he is still prepared to do whatever it takes. It appears the markets (FX and equities for sure) are anticipating uber-dovishness and as we noted in the preview, he will likely crow of the lack of contagion from Greece, how well his tools have worked, and how Q€ is working... we wonder if the Greek reporters will be blocked from the press conference?
Just when the Chinese plunge protection team (and "arrest shortie" task force) seemed to be finally getting "malicious selling" under control, first we saw a crack yesterday when the composite broke the surge of the past three days as a result of yet another spike in margin debt funded purchases, but it was last night's reminder that "good news is bad news" that really confused the stock trading farmers and grandmas, which goalseeked Chinese economic "data" beat across the board, with Q2 GDP coming solidly above expectations at 7.0%, and retail sales and industrial production both beating, but in the process raising doubts that the PBOC will continue supporting stocks.
Judging by the recent action in equity futures, the continuously rangebound US market since the end of QE may be entering its latest downphase, catalyzed to a big extent by the recent strength in the JPY (the EURJPY traded down to 2 year lows overnight), especially following yesterday's not one but two statements by Abe advisor Harada saying a USDJPY at 125 isn't "justified" and a 105 level would be appropriate. A level, incidentally, which would push the Nikkei lower by about 20% and crush Japanese pensions which are now mostly invested in stocks. Not helping matters was the pause in the Chinese and Hang Seng stock bubbles, with the former barely rising 0.3%, while the former actually seeing its first 1.6% decline after many days of torrid, relentless rises.
Non-bombastic, non-insulting simply straight-forward look at next week's key events and data. If you are so inclined...
Mario Draghi Unveils €60 Billion Per Month QE Through September 2016 With Partial Risk-Sharing: Live Conference WebcastSubmitted by Tyler Durden on 01/22/2015 09:30 -0400
From "whatever it takes" to OMT to "discussing" bond purchases, with European interest rates at record (incomprehensible) lows (apart from Greece) and EURUSD at 11-year lows (down 25 handles in the last 8 months), Mario Draghi looks set to unleash interventionist 'hell' on the investing public in Europe with EUR50 billion (plus plus) of ECB QE per month for as long as it takes...
Market Wrap: Futures Lower After BOJ Disappoints, ECB's Nowotny Warns "Not To Get Overexcited"; China SoarsSubmitted by Tyler Durden on 01/21/2015 07:55 -0400
Three days after Chinese stocks suffered their biggest plunge in 7 years, the bubble euphoria is back and laying ruin to the banks' best laid plans that this selloff will finally be the start of an RRR-cut, after China's habitual gamblers promptly forget the market crash that happened just 48 hours ago and once again went all-in, sending the Shanghai Composite soaring most since October 9, 2009. It wasn't just China that appears confused: so is the BOJ whose minutes disappointed markets which had been expecting at least a little additional monetary goosing from the Japanese central bank involving at least a cut of the rate on overnight excess reserves, sending both the USDJPY and US equity futures lower. Finally, in the easter egg department, with the much-anticipated ECB announcement just 24 hours away, none other than the ECB's Ewald Nowotny threw a glass of cold water in the faces of algos everywhere when he said that tomorrow's meeting will be interesting but one "shouldn’t get overexcited about it."
Having served up a large bowl of nothing with the official statement, the job of jawboning 'hope' for future monetary policy idiocy falls once again on Mario Draghi's shoulders as he takes the stage in what may well be a highly contentious press conference. Will he admit the mutiny? Will he 'fess up that OMT is a mirage? Will he admit to being a secretive dictator? Will he remove his spectacles and angrily point at a reporter?
what is strange is that while traditionally such a major downward growth revision would have been sufficient to send futures soaring - why: because in a world where only central banks are left, it means more central bank global bailouts of course - this time the adverse update actually had the impact of sending futures to their lows of the session, granted just a few tiny points since the market is clearly disconnected with even the most pro forma, non-GAAP version of reality, but the reaction direction was clearly unexpected. Perhaps this is explained by the ongoing devastation in both WTI and Brent, which were trading at $76.70 and $82.50 at last check, both down almost 3% as the plan to use Saudi Arabia to crush Russia has instead backfired and the Saudi princes are now openly looking at destroying the US shale infrastructure, as we forecast in the worst, for Obama, scenario.
A look at the currency market as if analysis mattered.
To summarize (even though with liquidity as non-existant as it is, this may be completely stale by the time we go to print in a minute or so), European shares erase gains, fall close to intraday lows following the Fed’s decision to end QE. Banks, basic resources sectors underperform, while health care, tech outperform. Companies including Shell, Barclays, Aviva, Volkswagen, Alcatel-Lucent, ASMI, Bayer released earnings. German unemployment unexpectedly declines. The Italian and U.K. markets are the worst-performing larger bourses, the Swiss the best. The euro is weaker against the dollar. Greek 10yr bond yields rise; German yields decline. Commodities decline, with nickel, silver underperforming and wheat outperforming. U.S. jobless claims, GDP, personal consumption, core PCE due later.
ECB Stress Test Fails To Inspire Confidence Again As Euro Stocks Slide After Early Rally; Monte Paschi CrashesSubmitted by Tyler Durden on 10/27/2014 07:09 -0400
It started off so well: the day after the ECB said that despite a gargantuan €879 billion in bad loans, of which €136 billion were previously undisclosed, only 25 European banks had failed its stress test and had to raised capital, 17 of which had already remedied their capital deficiency confirming that absolutely nothing would change, Europe started off with a bang as stocks across the Atlantic jumped, which in turn pushed US equity futures to fresh multi-week highs putting the early October market drubbing well into the rear view mirror. Then things turned sour. Whether as a result of the re-election of incumbent Brazilian president Dilma Russeff, which is expected to lead to a greater than 10% plunge in the Bovespa when it opens later, or the latest disappointment out of Germany, when the October IFO confidence declined again from 104.5 to 103.2, or because "failing" Italian bank Monte Paschi was not only repeatedly halted after crashing 20% but which saw yet another "transitory" short-selling ban by the Italian regulator, and the mood in Europe suddenly turned quite sour, which in turn dragged both the EURUSD and the USDJPY lower, and with it US equity futures which at last check were red.
Since it's not Tuesday (the only day that matters for stocks, of course), call it opposite, or rather stop hunt take out, day. First, it was the BOJ which, as we warned previously, would disappoint and not boost QE (sorry SocGen which had expected an increase in monetization today, and now expects nothing more from the BOJ until year end), which sent the USDJPY sliding, only to see the pair make up all the BOJ announcement losses and then some; and then it was Europe, where first German retail sales cratered, printing at -1.9%, down from 2.0% and on expectations of a 1.7% print, and then Eurozone inflation once again missed estimates, and while rising from the abysmal 0.5% in March printed at only 0.7% - hardly the runaway inflation stuff Draghi is praying for. What happened then: EURUSD tumbled then promptly rebounded a la the flash crash, and at last check was trading near the high of the day.
A dispassionate look at next week's events and data.
And so following yet another Fed taper, coupled with another disappointing manufacturing data point out of China, emerging markets did their thing first thing this morning and all the most unstable EM currency pairs - the TRY, the RUB, the ZAR and the HUF - all plunged promptly in the process pushing down the USDJPY which as become a natural carry offset to EM troubles, only to rebound promptly. Specifically, USDTRY blew out 400 pips to 2.3010 highs after which it bounced, and has now stabilized around 2.27, well above the Turkish central bank intervention level, USDZAR is back down to 11.2120 after hitting five-year highs of 11.3850, the Ruble also plunged after which it jumped on speculation of Russian central bank intervention, while futures are tracking even the tiniest moves by USDJPY and pushing the Emini which is trading in a liquidity vaccum by a quarter point for ever 2 or pips. And with all news overnight shifting from bad to worse (keep an eye on declining German inflation now) it goes without saying, that EM central banks around the world now are desperately trying to keep their currencies under control: which is why the market's jitteryness is only set to increase from here on out.
Just as Friday ended with a last minute meltup, there continues to be nothing that can stop Bernanke's runaway liquidity train, and the overnight trading session has been one of a continuing slow melt up in risk assets, which as expected merely ape the Fed's balance sheet to their implied fair year end target of roughly 1900. The data in the past 48 hours was hot but not too hot, with China Non-mfg PMI rising from 55.4 to 56.3 a 14 month high (and entirely made up as all other China data) - hot but not too hot to concern the PBOC additionally over cutting additional liquidity - while the Eurozone Mfg PMI came as expected at 51.3 up from 51.1 prior driven by rising German PMI (up from 51.1 to 51.7 on 51.5 expected), declining French PMI (from 49.8 to 49.1, exp. 49.4), declining Italian PMI (from 50.8 to 50.7, exp. 51.0), Spain up (from 50.7 to 50.9, vs 51.0 expected), and finally the UK construction PMI up from 58.9 to 59.4.