Beige Book

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What Goldman's Clients Are Most Concerned About





The answer, straight from the horse's mouth.

 
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Euro Slides, Futures Flat Ahead Of Mario Draghi's Press Conference And Q€ Cheat Sheet





It has been a while since we have seen the USDJPY rampathon push US equities higher, so in a day dominated by central banks (first the BOE momentarily), and then the ECB's much anticipated announcement of the actual QE launch at the Draghi press conference at 1:30pm CET (taking place, ironically enough, in the place that was the blueprint for the Eurozone's capital controls, Cyprus), it only makes sense that after weeks of stage fright, the USDJPY algos reminded the world they are alive and well, and proceeded to ramp the key FX pair above 120, even though the currency that everyone will be talking about today is the Euro, hugging 1.10 as of this moment, but the real question is what happens after Draghi gives the asset buying green light: has all of Q€ been priced in already in FX, and will the EURUSD resume its surge higher, or is parity next stop?

 
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The Only Notable Thing About Today's Beige Book Release...





...is that while nobody actually cares about its contents, when the flashing red headlines hit, they set off a firestorm of HFT algo buying in WTI on the day of the biggest inventory build in...forever.

 
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Frontrunning: March 4





  • RBS to cut up to 14,000 jobs in investment banking unit (FT)
  • Doctors, patients scramble ahead of high court Obamacare decision (Reuters)
  • Rajan Cuts India Rates After Modi Agrees to Inflation Target (BBG)
  • Russia’s Putin Makes First Public Comments on Killing of Boris Nemtsov (WSJ)
  • House breaks impasse, passes security funding without provisions (Reuters)
  • How a 25-Year-Old Investor Spurred Lumber Liquidators’ Plunge (BBG)
  • Jeff Immelt’s Overhaul of GE Impeded by Falling Oil Prices (WSJ)
  • Sahara India Defaults on Luxury Hotel Loans From Bank of China (BBG)
 
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Market Wrap: Futures Slide Despite Latest Central Bank Easing Blitz





Just like yesterday, it has - so far - been mostly about Asia in the overnight session, where as reported previously, we got the latest central bank engaging in an "unexpected" rate cut, after Reserve Bank of India Governor Rajan cut rates in an unscheduled move days after the government agreed for the first time to give the central bank a legal mandate to target inflation. This was India's second rate cut in 2 months, and yet despite the Sensex surging to a all time high over 30,000, it subsequently ended up closing red on the day, down -0.7%, despite the Indian currency sliding 0.4% to 62.1463 to a dollar. Is the half-life of thany incremental rate cut in an unprecedented barage of global central bank easing now less than a day?

 
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Market Wrap: Futures Unchanged Despite Latest Chinese Rate Cut





With key economic data either behind us (with the downward revised GDP), or ahead of us (the February payrolls on deck), and the Greek situation currently shelved if only for a few days/weeks until the IMF payment comes due and the farce begins anew, stocks are focuing on the widely telegraphed 25 bps Chinese rate cut over the weekend, which however has so far failed to inspire a broad based rally either in Asia (where the SHCOMP closed up 0.8% after first dipping in the red) or across developed markets. In fact, as of this moment futures are hugging the unchanged line as the USDJPY attempted another breakout of 120.000 but with numerous option barrier expiration stop at that level, it has since retracted all the overnight gains and is back to the Sundey lows, even as the EURUSD has seen a powerful breakout from overnight lows and is currently at the highest level since the US GDP print, following the release of the final European February PMI data, as a result of USD weakness since the European open.

 
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Four Key Themes From Q4 Earnings: From Dollar Headwinds To Management Over-Confidence





By reviewing the earnings transcripts from the companies of the S&P 500, Goldman Sachs notes 4 key themes emerge from the maelstrom of double-speak, bravado, and actual data (GAAP or non-GAAP). Without question the US Dollar strength is a drag on multinationals and CEOs are resolute in that (despite mainstream media prognostications that 'king dollar' is "unequivocally good") but what CEOs and CFOs seems just as resolutely positive about is that while macroeconomic and geopolitical uncertainties still exist in Asia and Europe, they expect solid US economic growth in 2015. It appears - given the data - they will be disappointed.

 
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Initial Jobless Claims Surge Above 300k, Highest Since June 2014





Tumbling retail sales and now surging jobless claims... perhaps the "low oil is awesome" narrative is not true after all. Initial Jobless claims surged to 316k (smashing expectations of 290k) and has not been higher since June 2014.  The BLS reports no unusual activity - so economists can't hust shrug this one off. Details on state-by-state job losses are lagged a week so we will not know if this is Shale Oil region-related but yesterday's Beige Book and day after day of announced job cuts by the energy sector suggest it is.

 
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Fed's Beige Book Shows Widespread Concerns Over Oil's Impact





The standard modest or moderate growth comments of the Fed's typically boring Beige Book were awkwardly interspersed with a narrative-interrupting 45 mentions of concerns about oil's price plunge impact...

 
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Frontrunning: January 14





  • U.S. Index Futures Decline on Commodities Slump, Growth Concerns (BBG)
  • Al Qaeda claims French attack, derides Paris rally (Reuters)
  • Charlie Hebdo With Muhammad Cover on Sale With Heavy Security Precautions (BBG)
  • How an Obscure Tax Loophole Brought Down Obama's Treasury Nominee  (BBG)
  • ECB’s bond plan is legal ‘in principle’ (FT)
  • Charlie Hebdo fallout: Specter of fascist past haunts European nationalism (Reuters)
  • DRW to acquire smaller rival Chopper Trading (FT)
  • Oil fall could lead to capex collapse: DoubleLine's Gundlach (Reuters)
 
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Market Wrap: Copper Plummets; Euro Plunges To 9 Year Low On Euro-Court's OMT Ruling, Futures Down





'After two days of sharp intraday and vicious reversals, the BTFD algos are suspiciously missing overnight, when as reported earlier, a bout of margin calls and stop loss selling meant not crude but copper would crash in today's episode of "guess the crashing commodity", on what Goldman dubbed a Chinese demand collapse which for those confused is different than an OPEC supply glut, and is also the reason why the entire commodity complex is trading at a decade plus low. As a result copper plunged to a five and a half year low, in the process halting the market due to the severity of the plunge. But the big event overnight was the farcical announcement by the European top court, which as everyone expected, rejected the German rejection of the OMT as illegal, stating it was not only legal (with certain conditions) but greenlighting the way for the ECB's QE in one week, a move which sent the EURUSD crashing to a fresh 9 year low!

 
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Stocks Bounce On Daily ECB QE Rumor Regurgitation, Oil Plunges On Goldman Downgrade





If you, like the BIS, are sick and tired of central bankers, and in this case the ECB's endless jawboning and now daily QE threats, determining the level of stocks, well then today is a good day as any to take your blood pressure medication. Because first it was ECB Governing Council member Ignazio Visco who told German newspaper Welt am Sonntag that the risk of deflation in the euro zone should not be underestimated and urged the bank to buy government debt, and then, yet another regurgitated story, came from CNBC whose "sources" reported that the ECB QE would be based on contributions from national central banks and paid in capital. And while otherwise the cross-correlation trades would have at least pushed the crude complex modestly higher, today it was Goldman's energy analyst Jeffrey Currie finally throwing up all over oil, with a report in which he said that "because shale can rebound quickly once capital investments return, we now believe WTI needs to trade near $40/bbl for most of 1H15 to keep capital sidelined."

 
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The Chart That Terrifies The Fed





"... investors are so certain about inflation that there is no insurance value in breakeven contracts. If the liquidity premium hasn’t changed, then current breakevens are consistent with 1.8% expected PCE inflation. In other words, either the market believes that even five years from now, the Fed will not achieve its target or the liquidity premia has jumped to 30bp."

 
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Futures Soar On Swiss NIRP Stunner, "Considerably Patient" Fed





After drifting unchanged for much of the overnight session, US futures exploded higher shortly after the previously noted SNB's NIRP announcement, which took place at 2 am eastern, which made it explicit that yet another banks will herd the bouncing dead cats right into new all time stock market highs, and following the European open, were carried even higher as the global "risk-on" momentum ignition algos woke up, spiking all recently depressed assets higher, including energy as Brent rose almost 3% despite Saudi Arabia’s oil minister Ali al-Naimi once again saying "it is difficult if not impossible" for OPEC and his kingdom to reduce output.

 
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