"With disinflationary global conditions and sluggish pay growth, most advanced economies are likely to remain locked into low-flation, and we expect headline and core inflation rates will continue to run below target and below central bank forecasts next year. Against this backdrop, we expect further near-term easing from the PBOC, RBA, BOJ and ECB and forecast only very gradual and delayed tightening by the Fed (starting around March 2016) and BoE (starting around end- 2016)."
It's Back To The Future As Stocks, Futures Jump On The Latest Abysmal Economic News; China Tremors ReturnSubmitted by Tyler Durden on 10/21/2015 05:57 -0500
26 years ago, today was envisioned as day when cars flew, holographic movies were box office hits, hoverboards roamed, and people were fired by fax. None of the happened. Instead the only "back to the future" moment this morning is a deja vu one we have seen every day for the past 7 years: bad economic news leading to surging stocks.
After yesterday's closing ramp "prudently" just ahead of an abysmal IBM earnings report with the lowest revenues since 2002, and the latest rally in capital markets which sent European stocks to their highest level since August on the back of a barrage of global bad data which has unleashed the Pavlovian liquidity dogs screaming for moar central bank bailouts, this morning has seen a modest decline in the Stoxx 600 driven by energy names, while S&P500 futures are set to open lower on IBM's disappointment at least until the latest massive BOJ USDJPY buying spree sends the pair to 120 and the S&P solidly in the green. The biggest political event overnight was the Canadian election, where Trudeau's liberals swept PM Harper from power, capping the biggest political comeback in the country's history; the Canadian dollar is largely unchanged after initially weakening then rising.
News That Matters
When China was closed for one week at the end of September, something which helped catalyze the biggest weekly surge in US stocks in years, out of sight meant out of mind, and many (mostly algos) were hoping that China's problems would miraculously just go away. Alas after yesterday's latest trade data disappointment, it was once again China which confirmed that nothing is getting better with its economy in fact quite the contrary, and one quick look at the chart of wholesale, or factory-gate deflation, below shows that China is rapidly collapsing to a level last seen in 2009 because Chinese PPI plunged by 5.9% Y/Y, its 43rd consecutive drop - a swoon which is almost as bad as Caterpillar retail sales data.
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For the past two weeks, the thinking probably went that if only the biggest short squeeze in history and the most "whiplashy" move since 2009 sends stocks high enough, the global economy will forget it is grinding toward recession with each passing day (and that the Fed are just looking for a 2-handle on the S&P and a 1-handle on the VIX before resuming with the rate hike rhetoric). Unfortunately, that's not how it worked out, and overnight we got abysmal economic data first from China, whose imports imploded, then the UK, which posted its first deflation CPI print since April, and finally from Germany, where the ZEW expectation surve tumbled from 12.1 to barely positive, printing at just 1.9 far below the 6.5 expected.
News That Matters
While the US bond market, if not equities, is enjoying the day off on a day in which there is no economic data just more Fed speakers including the Fed's Evans who on Friday uttered what may be the dumbest thing a central planner has ever said, the week's macro docket starts in earnest on Tuesday when China releases much anticipated September trade data. Here are the key events for the rest of the week.
Correction continues, but it is only a correction.
As part of a global investigation into how much physical gold central banks have stored at what location and how much is leased out, we submitted the local equivalent of a Freedom Of Information Act (FOIA) request at the central bank of Belgium (NBB) to obtain information about the amount of Belgian official gold reserves, the exact location of all gold bars, the type of gold accounts NBB holds at the Bank Of England (BOE) and how much is leased out and to whom. The outcome of this research was not what we had expected...
Biggest Weekly Stock Rally Since 2012 Continues Driven By Tumbling Dollar, Dovish Fed; Commodities SurgeSubmitted by Tyler Durden on 10/09/2015 05:53 -0500
The global risk on mood (which is really anything but, and is merely an unprecedented short covering squeeze as we will report momentarily) launched by an abysmal jobs report one week ago and "validated" yesterday by the surprisingly dovish FOMC minutes, which said nothing new but merely confirmed what most knew, namely that a rate hike is almost certain to not occur until mid-2016 if ever, and accelerated by a Fed-driven collapse in the dollar which overnight has led to a historic 3.4% move in the Indonesian Rupiah the most since 2008, has pushed global stocks even higher in their biggest weekly rally since 2012, despite the start of an earnings season where virtually every single company reporting so far has stumbled on earnings reports that were far worse than even gloomy consensus had expected.
News That Matters
Frequent followers of the German public campaign “Repatriate our Gold“ already know how intensively we have been struggling since 2011 (and longer) with Deutsche Bundesbank to finally – after more than 50 years of external storage of Germany’s gold – get credible transparency regarding this matter. Some progress was brought about recently (2012 disclosure of the whereabouts of Germany´s gold by BuBa; 2013 partial repatriation plan announced by BuBa; 2013 and ongoing through 2015 alleged physical repatriation of approximately 200 tons to date – equaling approximately 10% of Germany’s gold abroad). But real proof and transparency is still lacking from Bundesbank’s side!
- Congress probing U.S. spy agencies' possible lapses on Russia (Reuters)
- Defense Ministers From NATO Hit Out at Russian Action in Syria (WSJ)
- U.S. Rules Out Cooperation With Russia as Moscow Launches First Naval Strikes on Syria (WSJ)
- Man Who Called China's Boom and Bust Says Use This Rally to Sell (BBG)
- For Volkswagen, New Questions Arise on U.S. Injury Reporting (BBG)
- Deutsche Bank May Swell $14 Billion Selloff in China Bank Stakes (BBG)
- Emerging market slowdown hits German exports (FT)