When a lot of Keynesian cowbell doesn't work, the only cure for the deflationary fever must be more Keynesian cowbell which explains why Japan is about to double down on Abenomics, and why the ECB will almost invariably expand PSPP now that the deflationary boogeyman is back in Europe. Indeed, S&P is now out calling for ECB Q€ to last for nearly two years longer than originally planned and for the size of the program to be expanded to a Dr. Evil-ish €2,400,000,000,000.
Stocks, Futures Soar As Europe Joins Japan In Deflation, Surge Driven By Hopes For More Japan, ECB QESubmitted by Tyler Durden on 09/30/2015 06:50 -0400
Terrible economic news is wonderful news for markets, all over again, and with the worst S&P500 quarter since 2011 set to close today, some horribly "great" news is just what the window-dressing hedge funds, most of whom are deeply underperforming the broader market (not to mention Dennis Gartman) ordered.
The divergence theme is likely to strengthen in the week ahead.
When risk sold off last week in the wake of the Fed’s so-called “clean relent,” it signalled at best a policy mistake and at worst the loss of any and all credibility. Tonight, Yellen gets a do-over.
As the final inflation data before the FOMC decision, some have argued that this print matters most as an excuse to stay in 'emergency mode' - perhaps they are right. Consumer Prices dropped 0.1% (as expected) in August - this is the first 'deflation' since January - great news for consumers. Gasoline and airline tickets saw the biggest drops dragging down YoY CPI but The Fed will shrug its "transitory" shoulders but ex-food-and-energy did miss expectations, rising 1.8% YoY (against 1.9% exp). Notably food prices rose 0.2% in August, driven by a surge in egg prices. So WWJYD?
- Contrarian CEOs tell the Fed: Go ahead, raise my rates (Reuters)
- Goldman Warns Markets Unprepared for Fed as Treasuries Seesaw (BBG)
- Investors Look Beyond Fed Meeting, See Low Rates (WSJ)
- Volatility seen lingering no matter what the Fed does (Reuters)
- What Rising Interest Rates Would Mean for You (BBG)
- China Stocks Jump in Last Hour of Trading on State Support Signs (BBG)
- No Escape for China Hedge Funds Overwhelmed by Stocks Crash (BBG)
- Hedge Fund Bridgewater Defends Its ‘Risk-Parity’ Strategy (WSJ)
Ffor whatever reason starting in the last hour of trading and continuing until the close, the Shanghai Composite - after trading largely unchanged - went from red on the day to up 4.9% after hitting 5.9% minutes before the close - the biggest one day surge since March 2009 - and nearly erasing the 6.1% drop from the past two days in just about 60 minutes of trading, providing a solid hour of laughter to bystanders and observers in the process.
A review of the technical condition of the dollar in the days leading up to the FOMC meeting announcement.
Market participants, be they lenders or borrowers, know that “easy money” has an expiry date. If The FOMC raises rates, "we foresee negative effects on world GDP in the medium term, not only for emerging markets but also for industrialized economies." In other words, though emerging markets – through their dependence on capital inflows – will be at risk when America’s monetary policy eventually returns to “normal,” the same will be true for advanced economies.
Futures Surge Overnight As Deteriorating Economic Data Unleashes Blur Of Central Bank Interventions And QE RumorsSubmitted by Tyler Durden on 09/10/2015 06:55 -0400
It has become virtually impossible to differentiate between actual central bank intervention, hopes of central bank intervention, and how the two interplay on what was once the "market" but is now merely the place where money printers duke it out every day in some pretense of price discovery set by those who literally print money.
What is the reason for the drop? Well, one can believe the ECB's stated explanation which is that due to European summer vacations, activity in Europe has ground to a halt. Of course, this would suggest that monetization in the Eurozone is continent on managers' summer vacation plans, which is probably an even more troubling explanation of ECB activity bottlenecks than what may be really going on in Europe. The alternative? As we noted over the weekend when we reported that now even the IMF is discussing the upcoming limits to BOJ QE as a result of sellers running out of BOJs to hand over to the BOJ, the same may be taking place in Europe
There is no doubt that the Chinese economy is in a material economic slowdown. Policy officials’ aggressive actions and scare tactics against equity short sellers could continue to cause capital flight. However, this does not mean that China is going to sell large quantities of Treasuries. There is too much co-dependency between the US consumer and Chinese exporter. Destabilizing the US Treasury market with large sales would be tantamount to shooting themselves in the foot.
The REAL RISK currently is not missing some of the upside if the bull market does begin to resume, but rather catching the downside if this correction turns into a full-fledged bear.
With every passing week that money markets rates remain pinned to the zero bound by the Fed, the magnitude of the financial catastrophe hurtling toward main street America intensifies. When the next financial bubble crashes it can only be hoped that this time the people will grab their torches and pitchforks. Stanley Fischer ought to be among the first tarred and feathered for the calamity that he has so arrogantly helped enable.