Skirmishes in the South China Sea lead to full-scale naval confrontation. Israel bombs Iran, setting off an escalation of violence across the Middle East. Nigeria crumbles as oil prices fall and radicals gain strength. Bloomberg News asked foreign policy analysts, military experts, economists and investors to identify the possible worst-case scenarios, based on current global conflicts, that concern them most heading into 2015.
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.
Phibro could have the ability to mask its activity in Occidental’s hedging activity. Speaking with traders within the oil complex, I learned that there has been heavy trading activity on the OTC market on the backend of the oil curve.
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.
For many, if not most, companies and especially retailers, the great wildcard that is the "massive" Chinese market with the potential of hundreds of millions of buyers in the country's nascent middle class, has been a slam dunk when it comes to boosting stock prices. After all, what can go wrong? America's largest retailer was one of those hoping to capitalize on just this shareholder euphoria for Chinese exposure, and just like everyone else, it milked its Chinese exposure for many years. And then, unexpected everything did go wrong: as Bloomberg explains, "After years of heralding China as one of its best markets, Wal-Mart in August said its performance there was among the worst in its major countries." How is that possible? Read on to find out how Wal-Mart fabricated, lied and misled investors for years using every single trick in the book and then some.
Not quite as many fireworks overnight, in another session dominated by central banks. First it was revealed that China had injected CNY400 billion into the banking system to add liquidity as the economy slows, which is ironic because on the other hand China is also seemingly doing everything in its power to crash its nascent stock market bubble mania, following the latest news that China’s CSRC approved 12 IPOs ahead of schedule which is seen as a pre-emptive step to tighten interbank liquidity amid the recent rise in margin trading. Another central bank that was busy overnight was Russia's, which proceeded with its 5th rate hike of the year, pushing the central rate up by 100 bps to 10.50% as expected. Elsewhere, the Bank of England wants to move to a Fed-style decision schedule and start releasing immediate minutes as Governor Mark Carney overhauls the framework set up more than 17 years ago. The Swiss National Bank predicted consumer prices will drop next year and said the risk of deflation has increased as it vowed to defend its cap on the franc. Finally Norway’s central bank cut its main interest rate for the first time in more than two years and signaled it may ease again next year as plunging oil prices threaten growth in western Europe’s biggest crude exporter.
- New Normal headlines: Global stocks up on hopes of China policy easing (Reuters)
- China inflation eases to five-year low (BBC)
- U.S. Lawmakers Agree on $1.1 Trillion Spending Bill (WSJ)
- U.S. Braced for Blowback as CIA Report Lays Bare Abuses (BBG)
- CIA tortured, misled, U.S. report finds, drawing calls for action (Reuters)
- CIA Made False Claims Torture Prevented Heathrow Attacks (BBG)
- Oil Resumes Drop as Iran Sees $40 If There’s OPEC Discord (BBG)
- OPEC Says 2015 Demand for Its Crude Will Be Weakest in 12 Years (BBG)
- Greek yield curve inverted as politics raise default fears (Reuters)
Media World In Turmoil: Bloomberg Editor In Chief Out, Replaced With The Economist's John MicklethwaitSubmitted by Tyler Durden on 12/09/2014 10:59 -0500
While hardly as attention grabbing as the events in Congress today, moments ago the newsworld was shaken following news that the Editor in Chief of Bloomberg news, Matt Winkler, would step down and continue as editor-in-chief emeritus, working directly with Mike Bloomberg, to be replaced with the Editor in Chief of The Economist, John Micklethwait.
Without doubt, the most memorable line from the latest quarterly report by the BIS, one which shows how shocked even the central banks' central bank is with how perverted and broken the "market" has become is the following: "The highly abnormal is becoming uncomfortably normal.... There is something vaguely troubling when the unthinkable becomes routine." Overnight, "markets" did all in their (central banks') power to justify the BIS' amazement, when first the Nikkei closed green following another shocker of Japanese econ data, when it was revealed that the quadruple-dip recession was even worse than expected, and then the Shanghai composite soaring over 3000 or up 2.8% for the session, following news of the worst trade data - whether completely fabricated or not - out of China in over half a year.
Whether as a result of an unprecedented scare campaign by the Swiss National Bank (most recently reinforced by Citigroup), or due to confidence that Swiss gold is as safe abroad as it is at home, or simply due to good old-fashioned "hanging chads", today's most awaited event has come and gone and the result - according to early projections by Swiss television SRF - is that the Swiss population overwhelmingly rejected a referendum to force the Swiss National Bank to hold some 20% of its reserves in gold in a landslide vote, with about 78% voting against what AP politely termed "protecting the country's wealth by investing in gold."
If you ever needed proof that the financial press has been completely indoctrinated in the cult of Keynesian central banking consider the following...
Long ago, Keynes himself pointed out, perhaps inadvertently, the profound difference between GDP and wealth. If we merely want a higher GDP print - which measures spending, not wealth - governments should handout spoons so that millions of citizens can dig holes and millions more refill them. It would appear that the statesmen of Brussels are fixing to try the modern day equivalent of just that.
Because when the rape and pillaging of the US middle-class begins at the very top, it won't end until the sharp metal objects finally start falling.
Japan’s aging population needs rising prices like a hole in the head. The more “successful” Mr. Kuroda becomes in forcing prices up, the less money people will have to spend and invest. The economy will weaken, not strengthen, as a result. The advantages the export sector currently enjoys are paid for by the entire rest of the economy. moreover, even this advantage is fleeting. It only exists as long as domestic prices have not yet fully adjusted to the fall in the currency’s value. If one could indeed debase oneself to prosperity, it would long ago have been demonstrated by someone. While money supply growth in Japan has remained tame so far, the “something for nothing” trick implied by the BoJ’s massive debt monetization scheme is destined to end in a catastrophe unless it is stopped in time. Once confidence actually falters, it will be too late.
Due to the depreciation of the JPY, leading to soaring raw material costs (crushing SME profitability), TSR reports that Japanese bankruptcies year-to-date in 2014 are up a stunning 140% having unerringly surged since Abenomics was unleashed. Despite constant reassurance and propaganda from various political leaders each and every night that Japan is on the right track... it simply is not and if there is a better indicator of the death spiral Abe has unleashed than surging bankruptcies, we are unaware of one.