Interestingly, the BoJ’s attempts to achieve its price inflation target continue to end in failure with unwavering regularity. While the central bank’s astonishing ineptness in this respect is a blessing for Japan’s citizens (at least for the moment, their cost of living doesn’t increase further), it harbors the danger that even crazier monetary experiments will eventually be tried.
Following yesterday's Yen surge in the aftermath of the disappointing BOJ announcement, the pain for USDJPY long continued, with the key carry pair tumbling as low as 106, the lowest level since October 2014 before stabilizing around 107, and is now headed for its biggest weekly gain since 2008, which in turn has pushed the US dollar to to its lowest close in almost a year as signs of slowing growth in the U.S. dimmed prospects for a Federal Reserve interest-rate increase. As a result, global stocks fell and commodities extended gains in their best month since 2010.
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."
Venezuela is now so broke that it no longer has enough money to pay for its money.
"In the context of today’s paralyzed political-fiscal landscape how silly is it to suggest the Fed purchase a significantly large quantity of gold bullion at a substantially greater price than today’s free-market level, perhaps $5,000 an ounce? Admittedly, this suggestion is almost too outrageous to post under the PIMCO logo, but NIRP surely would have elicited a similar reaction a decade ago. But upon reflection, it could be an elegant solution since it flips the boxes on a foreign currency “prisoner’s dilemma”. Most critically, a massive gold purchase has the potential to significantly boost inflationary expectations, both domestic and foreign."
- China trade surprise gives stocks a lift (Reuters)
- JPMorgan profit hurt by drop in investment banking revenue (Reuters)
- About 40,000 Verizon workers launch strike (Reuters)
- Regulators Set to Reject Some Big Banks’ ‘Living Wills’ (WSJ)
- More Startups Are Getting Lower Valuations Than Joining the Billion-Dollar Club (BBG)
- Closures and court cases leave Turkey's media increasingly muzzled (Reuters)
In recent days, we have observed a distinct trading pattern: a ramp early in the US morning, usually triggered by some aggressive momentum ignition, such as today's unexplained pump then dump in the EURUSD with stocks rising after the European open, rising throughout the US open, then peaking around the time the US closed at which point it is all downhill for the illiquid market. So far today, the pattern has held, and after trading flat for most of the overnight session, with Europe initially in the red perhaps on disappointment about the Italy bank bailout fund, a bout of early Europe-open associated buying pushed US futures up, following the first rebound in the USDJPY after 7 days of declines which also helped the Nikkei close 1.1% higher.
While the market is still enjoying the post-NFP weekly data lull, economic data starts to pick up again in the coming days, alongside the start of the reporting season. Below are this week's key events.
Things are going from bad to worse for the efficacy of the grand - and failed from the beginning - experiment known as Abenomics. As Bloomberg reports, Larry Fink's Blackrock has changed its stance on investing in Japan, and joins Citigroup, Credit Suisse, and LGT Capital Partners, the $50 billion asset manager based in Switzerland in their decision to head for the exits. Ironically, Blackrock's decision comes only a few months after blogging about "The Case for Investing in Japan", in which they explicitly cited increased demand for Japanese stocks.
The Greater Depression has started. Most people don't know it because they can neither confront the thought nor understand the differences between this one and the last. As a climax approaches, many of the things that you've built your life around in the past are going to change and change radically.
Those betting against Goldman Sach’s retail investment advice have generally been on the right side of things. The same thing is about to happen again. “Short gold! Sell gold!” said Goldman’s head commodity trader, Jeff Currie, during a CNBC “Power Lunch” interview. Currie’s advice was in response to the question “Is there any commodity you are recommending that can help our viewers make some money?” Currie’s provided several reasons for shorting gold, blatantly wrong.
It seems that the final monetary frontier is about to be crossed, first in Europe, where as JPM says, "Helicopter money should be viewed as the combination of a fiscal expansion and an expanded QE program. As such, it is possible to imagine helicopter money in the Euro area in the event of a significant downturn" Increasingly more ECB members agree...
An avalanche of data from AsiaPac tonighht was a very mixed bag... South Korean trade data fell again and deflation struck; Aussie home price appreciation slowed to its weakest in 2.5 years; Japanese data was a total disastrophe everywhere... and then there was China. Both Manufacturing and Services PMIs bounced (the former back into expansion) which is a major problem for Janet, because if China is back in recovery, then The Fed no longer has to worry about China's economy when deciding on the next rate hike.
In recent weeks, Goldman Sachs has gained prominence by being the only bank left standing in its confidence that the Fed's forecast of 2 rate hikes in 2016 is wrong, and instead is sticking with its hawkish prediction of at least 3 rate hikes for 2016. This also explains why Goldman has been pounding the table on long US dollar bets, which incidentally have led to major losses in the past three major central bank announcements, two from Mario Draghi and one from Yellen. why we were curious how Goldman would reconcile the latest "dovish" shocker from Yellen which has unleashed a dramatic buying spree of all risk assets (as of this moments the S&P500 is trading at a 23x LTM GAAP P/E), with Goldman's hawkish bias.