Borrowing Costs

All Eyes On Yellen: Global Markets Flat On Dreadful Volumes, Oil Slides

In a world where fundamentals don't matter, everyone's attention will be on Janet Yellen who speaks at 1:15pm today in Harvard, hoping to glean some more hints about the Fed's intentionas and next steps, including a possible rate hike in June or July. And with a long holiday in both the US and UK (US bond market closes at 2pm today), it is no surprise overnight trading volumes have been dreadful, helping keep global equities poised for the highest close in three weeks; this won't change unless Yellen says something that would disrupt the calm that’s settled over financial markets.

Monetary Lunacy: The ECB Could End Up Funding Bayer's Purchase Of Monsanto

Today we find an even more striking example of just how broken the global bond market has become thanks to the ECB because as Reuters writes, Bayer could receive financing from none other than the European Central Bank to help fund its takeover of the world's largest seed company, US-based Monsanto, according to the terms of the ECB's bond-buying program.

Global Stocks, Futures Rally, Ignore Sharp Yuan Devaluation On Hopes Fed Is Right This Time

The single biggest event overnight was the PBOC's devaluation of the Yuan to the lowest since March 2011, setting the fixing at 6.5693, the highest in over 5 years and in direct response to a stronger dollar, which however if one looks at the DXY remains well below the recent highs in the 100 range, suggesting for China this is only just beggining. However, the fact that there was not more volatility in onshore and offshore overnight FX also comforted the market that at the same time as its was devaluing the PBOC was also intervening in the FX market, thus providing some assurance it would not allow runaway "risk off" sentiment prevail, nor would it promote another blitz round of capital outflows, leading to another gradual levitation in overnight risk.

Stronger Dollar Sends Futures Higher, Oil Lower, Asian Stocks To Two Month Lows

Yesterday's weak dollar headfake has ended and overnight the USD rallied, while Asian stocks dropped to the lowest level in 7 weeks and crude oil fell as speculation returned that the Federal Reserve will raise interest rates as early as next month. The pound jumped and European stocks gained thanks to a weaker EUR.

Global Stocks Slide, S&P Set To Open Red For The Year As Hawkish Fed Ignites "Risk Off"

After yesterday's algo-driven mad dash to close the S&P green both for the day and for the year following Fed minutes that came in shocking hawkish, the selling has continued overnight, led by the commodity complex as rate hike fears have pushed oil back down some 2% from yesterday's 7 month highs, which in turn has dragged global stocks lower to a six-week low, while pushing bond yields higher across developed nations as the market suddenly reprices the probability of a June/July rate hike.

Copper Slides To Three Month Low Despite Flat Futures, Oil; Dollar Rise Continues

After two violently volatile days in which the market soared (Monday) then promptly retraced all gains (Tuesday), the overnight session has been relatively calm with futures and oil both unchanged even as the BBG dollar index rose to the highest level since April 4. This took place despite a substantial amount of macro data from both Japan, where the GDP came well above the expected 0.3%, instead printing 1.7% annualized, which pushed stocks lower as it meant the probability of more BOJ interventions or a delay of the sales tax hike both dropped. Meanwhile, in China we got proof of the ongoing housing bubble when new property prices were reproted to have soared 12.4% Y/Y in April, which in turn pushed the local stock market to two month lows amid concerns the rampant housing bubble sector could divert funds from stocks. Yes, China is trading on the "risk" one bubble will burst another bubble.

The Endgame

There is a growing fear in financial and monetary circles that there is something deeply wrong with the global economy. Publicly, officials and practitioners alike have become confused by policy failures, and privately, occasionally even downright pessimistic, at a loss to see a statist solution. It is hardly exaggerating to say there is a growing feeling of impending doom. In short, growing evidence of price inflation and stagnant production can be expected to materially increase the risk of a global banking and currency meltdown. The best escape-route is ownership of anything other than purely financial assets and fiat currency deposits. No wonder the price of gold, which is the soundest of moneys, appears to have entered a new bull market.

Bloody Start To Friday The 13th For Global Markets

Global stocks have started Friday the 13th on the wrong foot, with not only Hong Kong GDP unexpectedly tumbling by 0.4%, the worst print in years while retail sales fell for a thirteenth straight month in March, the longest stretch since 1999 as the Chinese hard landing spreads to the wealthy enclave, but also following a predicted collapse in Chinese new loan creation, which will reverberate not only in China but around the globe in the coming weeks. The latest overnight drop in the Yuan hinted that should the recent USD strength continue, China will have no choice but to repeat its devaluation from last summer and winter. 

US Futures, Europe Stocks Jump On Oil, USDJPY Surge; Ignore Poor China Data, Iron Ore Plunge

The overnight session has been one of alternative weakness and strength: it started in China where stocks tumbled 2.8% to a two month low following some unexpected warnings in the official People's Daily newspaper and poor trade data. Concerns about China, however, were promptly forgotten and certainly not enough to keep global assets lower, with European stocks gapping higher at the open and rallying from a one-month low, driven by a "surprising" surge in the USDJPY which has moved nearly 200 pips higher since its post-payrolls low. Another driver is the jump in oil, which rallied just shy of $46 a barrel, buoyed by Canadian wildfires that are curbing production and speculation that the Saudi Arabian oil minister succession will be bullish for oil prices.

Futures Sink Ahead Of Payrolls, Capping Worst Week For Stocks Since February

Ahead of the most important macro economic event of the week, US nonfarm payrolls (Exp. +200,000, down from 215,000 despite a very poor ADP report two days ago), the markets have that sinking feeling as futures seem unable to shake off what has been a steady grind lower in the past week, while the Nasdaq has been down for nine of the past ten sessions, after yet another session of jawboning by central bankers who this time flipped to the hawkish side, hinting that the market is not prepared for a June rate hike. Additionally, sentiment is showing little sign of improvement due to concerns over global-growth prospects as markets seek to close the worst week since the turmoil at the start of the year.

"A 2015-like Market Crash In Chinese Commodities Is Inevitable"

Is Everyone Wrong On The "Causation" Of The Commodity Bubble? While it appeared 'retail' was responsible for the panic-buying chaotic volume surge in Chinese commodities, Axiom Capital Management's Gordon L Johnson points out that in fact... China Bank Special Interest Vehicles' "Bold" Commodity Speculation Is The Real Budding Black Swan

Global Stocks Plunge After Bank Of Japan "Shock"

Less than one week after the BOJ floated a trial balloon using Bloomberg, that it would reduce the rate it charged some banks which set off the biggest USDJPY rally since October 2014, we are back where we started following last night's "completely unexpected" (for everyone else: we wrote "What If The BOJ Disappoints Tonight: How To Trade It" hours before said "shock") shocking announcement out of the BOJ which did absolutely... nothing. "It’s a total shock,” Nader Naeimi, Sydney- based head of dynamic markets at AMP Capital Investors told Bloomberg. "From currencies to equities to everything -- you can see the reaction in the markets. I can’t believe this. It’s very disappointing."