BOE

It has gotten to where just the lack of a rout in Bunds or any other government issue is enough to activate the "bullish" outside stop hunting algo, which is probably why ES has jumped overnight in another illiquid, newsless session. Curiously, Bunds shave not sold off even though the EUR has jumped sharply by almost 100 pips overnight to a 3 month high also on no news (with some amusing acrobatics by the USDJPY alongside) traditionally a bearish indicator for the Dax and thus the S&P. Perhaps the algos are just late, or maybe the "weak dollar is good for stocks" thesis has been activated, but in any event this morning's ramp higher in the ES will continue until all upside stops are hunted down by Virtu and crushed mercilessly.

Following yesterday's turbulent bond trading session, where the volatility after the worst Bid to Cover in a Japanese bond auction since 2009 spread to Europe and sent Bund yields soaring again, in the process "turmoiling" equities, today's session has been a peaceful slumber barely interrupted by "better than expected" Italian and a German Bund auction, both of which concluded without a hitch, and without the now traditional "technical" failure when selling German paper. Perhaps that was to be expected considering the surge in the closing yield from 0.13% to 0.65%. Not hurting the bid for 10Y US Treasury was yesterday's report that Japan had bought a whopping $23 billion in US Treasurys in March, the most in 4 years so to all those shorting Tsys - you are now once again fighting the Bank of Japan.

GBPUSD is now up 3 big figures since the first exit polls hit, testing 1.5550 this morning and back to unchanged for the year. While initial fears of Brexit stymied the response to the Tory victory, it appears trader are pressing for stops above 1.5550 seeing more room to run here before Brexit possibilities begin to weigh.

Today’s Eurogroup meeting will be key in determining where Greece and its creditors negotiations currently stand. Over in the US today, it’s the usual post payrolls lull with just the labor market conditions data expected.

With the big macro data out of the way, attention today and for the rest of the week will focus on the aftermath of the latest Chinese rate cut - its third in the past 6 months - which managed to boost the Shanghai Composite up by 3% overnight but not nearly enough to make up for losses in the past week; any resumption of the 6+ sigma volatility in the German Bund, which already has been jittery with the yield sliding to 0.52% only to spike to 0.62% shortly thereafter before retracing some of the losses; and finally Greece, which in a normal world would have concluded its negotiations during today's Eurogroup meeting and unlocked up to €7 billion in funds for the coming months. Instead, Greece may not only not make its €770 million IMF payment tomorrow but according to ever louder rumors, is contemplating a parallel currency on its way out of the Eurozone.

How five investment themes will evolve in the week ahead.

The politicians like the bankers and the central bankers, are happy to kick the can down the road and let their successors and future generations pick up the tab and pay for the economic mess that they refuse to address.

With US Q1 GDP set to be a huge disappointment to initial estimates of 3% growth set at the beginning of the year, and since plunging to 1% or lower when it is reported later this week because, well, it inexplicably snowed in the winter for the second year in a row, earlier today we learned that US harsh weather cross the Atlantic and landed in the UK where ONS reported that the economy grew at a tepid pace of just 0.3% in the first quarter, well below consensus estimates of 0.5%, and at the lowest pace since Q4 2012 when GDP posted a 0.3% drop.

Following yesterday's early MNI rumor that a Chinese QE is being "considered" and which sent the Shanghai Composite surging 3% and led to an initial boost in US stock futures, overnight the PBOC scrambled to once again deny such speculation. Of course, going full "cold Turkey" on Chinese stimulus would be too much for the market to handle, so in a piece by the WSJ also released overnight, the author said the PBOC would pivot from outright QE to mere LTRO, which is also not new and was reported over a week ago here in "China Floats QE Trial Balloon, PBoC May Launch LTROs." In any event, for now at least, Asian stocks are not happy despite Apple's latest blockbuster results, and neither is Europe, with the Stoxx 600 down 1%, and even the E-mini is hugging 2100 unable to levitate on any imminent central bank intervention.

The trio of macro-prudential policy, the onset and evolution of shadow banking, and the nebulous concept of financial stability may have become a toxic cocktail which can be instrumental in moving forward the Federal Reserve’s timeline for lift-off zero bound rates.  The intuition here is stooped in concepts of volatility and how market structure evolution may contribute or detract from asset volatility. Volatility is the square root of time. Financial repression times time equals volatility. Financial repression and/or macro-prudential policy times time equals the inverse of financial stability. Financial stability inverted equals volatility squared.

Whether it is in sympathy with the now relentless surge in the Shanghai Composite which tacked on another 2.44% overnight to close at a fresh multi-year high just shy of 4400, well more than double from a year ago, or because Mrs Watanabe was unable to read the latest Japan trade data whose first trade surplus in 3 years hinted that there will be no new easing by the BOJ any time soon, but overnight the Nikkei closed above 20,000 for the first time in 15 years, with "makers of chocolate, mayonnaise, potato chips and household appliances" helping lift the Tokyo market according to the WSJ. The now daily Asian euphoria however did not last long in the European session, and after opening higher, the Stoxx Europe 600 slipped into negative territory just an hour into trading, and was down 0.4% by midmorning, lead by a near 1% decline on Athens' mains stock index, which has since recouped losses stemming from the overnight report that the ECB is considering an up to 50% haircut on Greek bank collateral, a move that would wipe out the Greek financial sector with ease.

If you thought currency-wars were a problem, just wait until crony-wars begin. In a stunning show of disagreement among the omnipotent, The FT reports that a Freedom of Information Act request has confirmed The Bank of England wrote to US authorities seeking clarity about Berkshire’s absence from a provisional list of "systemically import" (Too Big To Fail) financial institutions (SIFIs). The US Treasury declined to comment...

While this week sees the peak of Q1 earnings season, it will be a generally quiet week on the macro economic front for both EM and DM, with the emphasis on the latest seasonally adjusted manufacturing sentiment surveys, US durables and Japan trade.

It is only fitting that the next business day following a headline that "Global Futures Slide China Tumbles On Short Selling Boost" we would see China, in an apparent panic, not only cut its RRR by 100 bps to 18.5% - far more than expected and the most since 2008 - but, more importantly, hinted that the Friday regulatory decision to encourage short sales and tighter margin rules on "umbrella trusts" was in no way meant to pop that the Chinese stock bubble, ridiculous as it may be. End result: after Chinese futures crashed by up to 6% on Friday after the Shanghai close, overnight the SHCOMP was down just 1.64%, erasing the bulk of the futures loss. More importantly, US equity futures have seen a strong bid this morning in yet another attempt to defend not only the Apple Sachs Industrial Average from going red on the year but the all important 100 DMA technical levels.