Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."
Fed’s wealth effect kicks in: “Mind-blowing” how the luxury market has been “completely on fire.” The rest, well….
While there has been no global economic outlook cut today, or no further pre-revision hints of "decoupling" by the appartchiks at the US Bureau of Economic Analysis, both European and US equities are pointing at a higher open, because - you guessed it - there were more "suggestions" of "imminent" QE by a central bank, in this case it was again ECB's Constancio dropping further hints over a potential ECB QE programme, something the ECB has become the undisputed world champion in. The constant ECB jawboning, and relentless central bank interventions over the past 6 years, led to this:
- GERMANY SELLS 10-YEAR BUNDS AT RECORD-LOW YIELD OF 0.74%
The punchline: this was another technically "failed" auction as it was uncovered, the 10th of the year, as there was not enough investor demand at this low yield, and so the Buba had to retain a whopping 18.8% - the most since May - with just €3.250Bn of the €4Bn target sold, after receiving €3.67Bn in bids.
Just two months after the OECD cut its global growth outlook, overnight the Organisation for Economic Co-operation and Development cut it again, taking down its US, Chinese, Japanese but mostly, Eurozone forecasts. In the report it said: "The Economic Outlook draws attention to a global economy stuck in low gear, with growth in trade and investment under-performing historic averages and diverging demand patterns across countries and regions, both in advanced and emerging economies. “We are far from being on the road to a healthy recovery. There is a growing risk of stagnation in the euro zone that could have impacts worldwide, while Japan has fallen into a technical recession,” OECD Secretary-General Angel Gurria said. “Furthermore, diverging monetary policies could lead to greater financial volatility for emerging economies, many of which have accumulated high levels of debt.” And sure enough, the OECD's prescription: more Eurozone QE. As a result, futures in the US are in fresh all time high territory ignoring any potential spillover from last night's Ferguson protests, just 30 points from Goldman's latest 2015 S&P target, Stoxx is up 0.5%, while bond yields are lower as frontrunning of central bank bond purchases resumes. Oil is a fraction higher due to a note suggesting the Saudi's are preparing for a bigger supply cut than expected, although as the note says "it is unclear if the cut sticks."
Another day, another case of central banks, not one but two this time, dictating "price" action.
As the generational war heats up, we should all remember the source of all the bubbles and all the policies that could only result in generational poverty: the Federal Reserve.
As the chart demonstrates, there has never been a time when the all important leading indicator that is the San Fran housing market (see here for the reasons why) has posted such a steep slowdown in annual price increases without a bubble of some sort, be it the dot com, the first housing or the European sovereign debt bubble, having burst. Will this time finally be different?
Following misses in yesterday's Markit Service PMI, Existing Home Sales and the Dallas Fed report, and today's Durable Goods numbers, we just made it a pentafecta for misses in US econ data, when the just released August Case-Shiller data for August confirmed once again that US housing is rapidly slowing down, when the Top 20 Composite Index (Seasonally Adjusted) posted another decline in August, its fourth in a row, declining by -0.15% and missing expectations of a modest 0.2% rebound (following last month's -0.5%) decline. The best summary of the situation came from S&P's David Blitzer: "The deceleration in home prices continues... The Sun Belt region reported its worst annual returns since 2012, led by weakness in all three California cities -- Los Angeles, San Francisco and San Diego." But who cares what the birth (and death) place of every housing bubble is doing, right?
- CDC says returning Ebola medical workers should not be quarantined (Reuters)
- Sweden’s central bank cuts rates to zero (FT)
- Hacking Trail Leads to Russia, Experts Say (WSJ)
- Discount-Hunting Shoppers Threaten Stores’ Holiday Cheer (BBG)
- Apple CEO fires back as retailers block Pay (Reuters)
- Repeat after us: all China data is fake - China Fake Invoice Evidence Mounts as HK Figures Diverge (BBG)
- FX Traders’ Facebook Chats Said to Be Sought in EU Probe (BBG)
- Euro Outflows at Record Pace as ECB Promotes Exodus (BBG)
- Apple boosts R&D spending in new product hunt (FT)
If yesterday's markets closed broadly unchanged following all the excitement from the latest "buy the rumor, sell the news" European stress test coupled with a quadruple whammy of macroeconomic misses across the globe, then today's overnight trading session has been far more muted with no major reports, and if the highlight was Kuroda's broken, and erroneous, record then the catalyst that pushed the Nikkei lower by 0.4% was a Bloomberg article this morning mentioning that lower oil prices could mean the BoJ is forced to "tone down or abandon its outlook for inflation." This comes before the Bank of Japan meeting on Friday where the focus will likely be on whether Kuroda says he is fully committed to keeping current monetary policy open ended and whether or not he outlines a target for the BoJ’s asset balance by the end of 2015; some such as Morgan Stanely even believe the BOJ may announce an expansion of its QE program even if most don't, considering the soaring import cost inflation that is ravaging the nation and is pushing Abe's rating dangerously low. Ironically it was the USDJPY levitation after the Japanese session, which launched just as Europe opened, moving the USDJPY from 107.80 to 108.10, that has managed to push equity futures up 0.5% on the usual: nothing.
ECB Stress Test Fails To Inspire Confidence Again As Euro Stocks Slide After Early Rally; Monte Paschi CrashesSubmitted by Tyler Durden on 10/27/2014 06:09 -0500
It started off so well: the day after the ECB said that despite a gargantuan €879 billion in bad loans, of which €136 billion were previously undisclosed, only 25 European banks had failed its stress test and had to raised capital, 17 of which had already remedied their capital deficiency confirming that absolutely nothing would change, Europe started off with a bang as stocks across the Atlantic jumped, which in turn pushed US equity futures to fresh multi-week highs putting the early October market drubbing well into the rear view mirror. Then things turned sour. Whether as a result of the re-election of incumbent Brazilian president Dilma Russeff, which is expected to lead to a greater than 10% plunge in the Bovespa when it opens later, or the latest disappointment out of Germany, when the October IFO confidence declined again from 104.5 to 103.2, or because "failing" Italian bank Monte Paschi was not only repeatedly halted after crashing 20% but which saw yet another "transitory" short-selling ban by the Italian regulator, and the mood in Europe suddenly turned quite sour, which in turn dragged both the EURUSD and the USDJPY lower, and with it US equity futures which at last check were red.
A quick anecdote that should quickly confirm just how broken everything is: earlier today MarkIt reported European manufacturing data that was atrocious, with both German and European PMIs tumbling to levels not seen since mid-2013, and with Europe's growth dynamo now in a contraction phase clearly signalling what has been long overdue: a European triple dip recession. So what happens? Moments later Germany sells €4.1 billion in 10 Year paper at a record low yield below 1%.... even as the Bundesbank had to retain a whopping 17.84% of the auction, the highest since June, with only €4.663 Bn in bids for the €5 Bn target, the first miss since May 21. So hurray for the central banks, boo for the economy, and as for that mythical creature, once known as bond vigilantes, our condolences: good luck figuring out what the hell just happened, and good luck recalling what a free market is.
For the 3rd month in a row, S&P Case-Shiller home prices fell MoM with July's 0.5% drop the biggest since November 2011. This dragged the YoY growth to 6.75% (missing expectations of 7.4%) and its slowest rate of increase since November 2012. Non-seasonally-adjusted the drop is even larger (-0.6% MoM). Perhaps most notably San Francisco was the biggest drag on the index.
- Hong Kong protesters stockpile supplies, fear fresh police advance (Reuters)
- Protesters stay out on Hong Kong streets, defying Beijing (Reuters)
- Traders Turn Up Grilling Sausages at Hong Kong Protests (BBG)
- Ukraine Army Sees Worst Day Since Truce as Battles Flare (BBG)
- Islamic State uses grain to tighten grip in Iraq (Reuters)
- For Putin Ally, U.S. Sanctions Only Add to Anti-Russia Conspiracy Theory (WSJ)
- Coinbase Leads Move to Bring Bitcoin to Masses (BBG) - good luck
- Austria Cracks Down on Spies -- and Jihadis (BBG)
- EU Believes Apple, Fiat Tax Deals Broke Rules (WSJ); Apple’s Irish Tax Deal ‘Engineered’ to Boost Employment, EU Says (BBG)
It has been a night of relentless and pervasive disappointing economic data from just about every point on the globe: first the Chinese HSBC manufacturing data was well short of expectations (50.2 vs. Exp. 50.5), which was promptly spun as bullish and a reason for more stimulus by the PBOC even though the central bank has been constantly repeating it will not engage in western-style shotgun easing. Then Japanese wages, household spending and industrial production came in far below expectations - in fact at levels which suggest Japan is once again in a recession - which once again was spun as bullish, because the BOJ has no choice but to do more of the same failed policies that have made Abenomics the laughing stock of the world. Finally, moments ago Europe reported the lowest inflation data in 5 years, as well as core CPI sliding to just 0.7%, and which was, wait for it, immediately spun as bullish for risk as once again the local central bank would have "no choice but to ease." In other words, thank god for horrible news: because how else will the rich get even richer?