The markets were following a rollercoaster night for the Japanese Yen, when after several media headlines Abe was said to have announced a stimulus package that would be more than JPY28 trillion, sending Japanese stocks higher 1.7% while the USDJPY spiked but well off overnight highs, pushing risk assets higher. Europe and US futs were also in the green on optimism from AAPL's earnings, but all eyes will be on today's FOMC announcement.
In another reminder that monetary unorthodoxy in the face of NIRP is coming to a savings account near you, overnight the RBS banking group warned 1.3 million customers they could be charged negative interest rates if the Bank of England cuts base rates below zero. As seen in the letter posted below, the bank warned that: "Global interest rates remain at very low levels and in some markets are currently negative. Dependent on future market conditions, this could result in us charging on credit balances."
After breaking a multi-year stretch of 9 daily record highs in the Dow Jones, overnight global markets saw some early weakness with Asian stocks retreating after BOJ chief Kuroda dashed hopes for so-called helicopter money, triggering yen’s steepest rally in a month and pulling the Nikkei lower by 1.1%. This however did not last long, and around the European open the traditional ramp in the USDJPY helped European equities shrug off early downside, while US equity futures have already recovered half of yesterday's losses.
Following the previously noted fireworks from Kuroda, who in a BBC interview said that there is "no possibility" of helicopter money (which however the WSJ quickly added was based on an interview conducted in mid-June which supposedly means there is possibility now) In under an hour the market will turn its attention to the ECB's latest statement, where as SocGen's Anatoli Annenkov writes, it is "time to send another dovish signal."
In a surprising rejection of Ben Bernanke, BOJ governor Haruhiko Kuroda said that there will be no helicopter money in Japan, amid increasing speculation over monetary and fiscal policy in the world’s third-largest economy. Given the current institutional setting, there is "no need and no possibility for helicopter money," Kuroda said in a BBC Radio 4 program that was broadcast Thursday. “At this moment, the Bank of Japan has three options with quantitative and qualitative easing with negative interest rates."
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.
"In the middle of the journey of our life I found myself within a dark woods where the straight-way was lost" Dante Alighieri "There is a fifth dimension beyond which is known to man...is the middle ground between the pit of man's fears and the summit of his knowledge", Twilight Zone
Having panciked briefly on Friday night on news of a Turkish coup, which has since not only failed but been cast away as speculation rises that it was staged and designed to give Erdogan even more authoritarian power, markets have moved on and are now focusing on the main overnight event which was the surprising $32 billion bid by Japan's SoftBank for U.K.’s semiconductor giant ARM which has sent comparable semis higher in European trading and pushing the Stoxx Europe 600 Index up by 0.6%, after surging 3.2% last week. After sliding sharply on Friday, US equity futures are up 0.1% in early trading.
The tremendous rally of the past 4 days that has sent global stocks soaring in recent days has finally been capped and European shares, S&P futures are all modestly lower following a deadly terror attack in Nice, France. Meanwhile Asian stocks rose as Chinese economic data beat estimates, with Q2 GDP rising by 0.1% more than the estimated 6.6% on the back of stronger housing data.
It appears the machines were not expecting Mark Carney to disappoint this morning. When the Bank of England decision hit at 7amET, US equities instantly tumbled but VIX flash-crashed to almost an 11 handle, before reversing almost instantly back above 13. Having run all the stops lower, it appears the machines have run out of VIX stomping ammo as stocks roll over at the open...