Market Wrap: Evans' "Catastrophe" Comment Blasts Overnight Futures Into Overdrive, 10-Year Rises To 2%Submitted by Tyler Durden on 01/08/2015 07:56 -0400
After subdued trading in the overnight session until a little after 8pm Eastern, algos went into overdrive just around the time the Fed's 2015 voting member and uberdove Charlie Evans told reporters that "raising rates would be a catastrophe", hinting that the first rate hike would likely be - as usual - pushed back from market expectations of a mid-2015 liftoff cycle into 2016 or beyond (but don't blame the US, it is the "international situation's" fault), in the process punking the latest generation of Eurodollar traders yet again. Whatever the thinking, S&P futures soared on the comments and were higher by just under 20 points at last check even as Crude has failed to pick up and the 10Y is barely changed at 2.00%.
While the last trading day of 2014 will be important if only to see if Dow 18,000 can be recaptured on what is sure to be the lowest volume in years, don't expect much help from Brent which continues to slide and was down nearly 3% at $56.20 or WTI which is also flirting with the $53 level, down almost 2% overnight both set to cap the worst year for the commodity since 2008. Not much should be expected from Treasuries either, set to return over 6% in 2014 - the best performance since 2011 - crushing the latest hoard of bond shorts all of which got the Treasury move in 2014 epically wrong, which will close early at 2 pm. Which means that the HFT algos will once again be driven off the illiquid USDJPY correlation, where low volume will mean 5-10 pip moves today should be the norm, as well as European stocks, whose Stoxx Europe 600 Index rose 0.3% earlier on the latest round of jawboning by an ECB member, this time Dutchman Peter Praet, who said in an interview with German newspaper Boersen-Zeitung that lower oil prices increasingly risk de-anchoring inflation expectations, indicating that quantitative easing is becoming more likely.
Today's early close across markets likely means that the blow-off top multiple-expansion mania phase (because forward EPS estimates over the past couple - that means 2 to Janet Yellen fanatics - weeks have in fact declined) of 2014 may be coming to an end. However with already abysmal volumes literally grinding to an early halt at 1:15 pm Eastern today, and with a market as boring as this one, where any news is immediately interpreted as good, not matter how bad it actually is or how "revised" or "goal-seeked", we may see futures, which already are trading some 4 points above fair value, successfully levitate by another 20 points and hit Goldman's 2100 year end target - year-end for 2015 that is - one year ahead of time.
We are sure this data is entirely dependable but when continuing jobless claims spike over 6% last week and collapse almost 6% this week - and the labor department says there is nothing unusual - we hold our hands up and laugh. Continuing claims printed 2.37mm (beating expectations) and initial claims dropped 6k to 289k (beating expectations). But the most critical aspect of today's report is the one-week-delayed details on which states saw a rise in initial claims - Pennsylvania: 12,302 and Texas 9,107 - both major Shale states. Has the job-culling, cost-cutting started?
After drifting unchanged for much of the overnight session, US futures exploded higher shortly after the previously noted SNB's NIRP announcement, which took place at 2 am eastern, which made it explicit that yet another banks will herd the bouncing dead cats right into new all time stock market highs, and following the European open, were carried even higher as the global "risk-on" momentum ignition algos woke up, spiking all recently depressed assets higher, including energy as Brent rose almost 3% despite Saudi Arabia’s oil minister Ali al-Naimi once again saying "it is difficult if not impossible" for OPEC and his kingdom to reduce output.
Confused at how such awesome retail sales headlines can lead to the kind of weakness we are seeing in stocks now that Lending Club's IPO has started trading? Wondering why bonds are now lower in yield on the day in the face of 'proof' that the US consumer is back? Wonder no more, as STA Wealth Management's Lance Roberts points out, November's seasonal adjustment for retail sales was - drum roll please - the 3rd largest on record... so maybe, just maybe, the 'market' is seeing through that pure riggedness, wondering about the huge surge in continuing claims, and agog at the blowout in credit spreads and collapse in crude...
While we are sure this will be quietly revised away through the magic of the labor department's statistical shenanigans (even though they note no "unusual" factors, this week saw the biggest WoW rise in continuing jobless claims since Nov 2008. While drawing any linkages to the collapse in the oil-well-permits is premature, the coincidence of the last 2 weeks seing a dramatic trend change in continuing claims is noteworthy.
Not quite as many fireworks overnight, in another session dominated by central banks. First it was revealed that China had injected CNY400 billion into the banking system to add liquidity as the economy slows, which is ironic because on the other hand China is also seemingly doing everything in its power to crash its nascent stock market bubble mania, following the latest news that China’s CSRC approved 12 IPOs ahead of schedule which is seen as a pre-emptive step to tighten interbank liquidity amid the recent rise in margin trading. Another central bank that was busy overnight was Russia's, which proceeded with its 5th rate hike of the year, pushing the central rate up by 100 bps to 10.50% as expected. Elsewhere, the Bank of England wants to move to a Fed-style decision schedule and start releasing immediate minutes as Governor Mark Carney overhauls the framework set up more than 17 years ago. The Swiss National Bank predicted consumer prices will drop next year and said the risk of deflation has increased as it vowed to defend its cap on the franc. Finally Norway’s central bank cut its main interest rate for the first time in more than two years and signaled it may ease again next year as plunging oil prices threaten growth in western Europe’s biggest crude exporter.
After last week's jerk higher (now revised even higher to 314k), this week saw a modest 17k drop to 297k (magically back below the 300k Maginot Line) but still missed expectations. Obviously, initial claims still linger near 14 year lows but the smoother 4 week average rose around 5k to 299k. Continuing claims rose 39k and has hovered at these decade-long lows for 6 weeks now - though unadjusted Regular State (ex) employees claiming UI benefits jumped 125K from 2.065 million to 2.190 million.. It appears the trend of improvement has ended/stabilized.
Today we'll learn more about whether Mr Draghi becomes Super Mario in the near future as the widely anticipated ECB meeting is now only a few hours away. We will do another summary preview of market expectations shortly, but in a nutshell, nobody really expects Draghi to announce anything today although the jawboning is expected to reach unseen levels. The reason is that Germany is still staunchly against outright public QE, and Draghi probably wants to avoid and outright legal confrontation. As DB notes, assuming no new policy moves, the success of today's meeting will probably depend on the degree to which Draghi indicates the need for more action soon and the degree to which that feeling is unanimous within the council. Over the past weekend Weidmann's comment about falling oil prices representing a form of stimulus highlights that this consensus is still proving difficult to build. It might need a couple more months of low growth and inflation, revised staff forecasts and a stubbornly slow balance sheet accumulation to cement action.
Following last week's holiday-shortened week, which was supposed to be quiet and peaceful and was anything but thanks to OPEC's shocking announcement and a historic plunge in crude prices, we have yet another busy week of macroeconomic reports to look forward to.
Having trended gradually higher for the last 5 weeks (missing expectations for 4 of them), initial jobless claims printed an uncomfortable 313k (against expectations of a 288k print - the biggest miss in over 11 months) pushing to its worst level in 3 months. This is the biggest week-over-week rise in almost 4 months. Continuing claims hovers at 14-year lows and dropped this week to 2.316 million. Perhaps worryingly, this rise in initial claims is considerably larger than the average shift for this time of year...
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.
It is still far too early to call a turn in the long-term trend of initial jobless claims but this is the 5th week that new lows have not been made, 4th miss in a row, and (despite last week's upward revision) claims sit at 2-month highs. Initial claims printed 291k (against 284k expectations) down very slightly from an upwardly revised 293k last week. However, continuing claims continue to tumble to fresh cycle lows at 2.33 million (below expectations and well down from last week's jump).
Global Slowdown Confirmed By PMIs Missing From Japan To China To Europe; USDJPY Nears 119 Then SlidesSubmitted by Tyler Durden on 11/20/2014 08:00 -0400
The continuation of the two major themes witnessed over the past month continued overnight: i) the USDJPY rout accelerated, with the Yen running to within 2 pips of 119 against the dollar as Albert Edwards' revised USDJPY target of 145 now appears just a matter of weeks not months (even though subsequent newsflow halted today's currency decimation and the Yen has since risen 100 pips , and ii) the global economic slowdown was once again validated by global PMIs missing expectations from Japan to China (as noted earlier) and as of this morning, to Europe, where the Manufacturing, Services and Composite PMI all missed across the board, driven by a particular weakness in France (Mfg PMI down from 48.5 to 47.6, below the 48.8 expected), but mostly Germany, after Europe's growth dynamo, which disappointed everyone after yesterday's rebound in the Zew sentiment print, printed a PMI of only 50.0, down from 51.4 a month ago, down from 52.7 a year ago, and below the 51.5 expected. And just as bad, Europe's composite PMI just tumbled to 51.4, the lowest print in 16 months!