Despite the mainstream media's premature exuberance over the 10Y yield breaking above 3.00%, it didn't (according to Bloomberg) but that didn't stop it from closing as close as it can get to the high yields of the year (and back to July 2011 levels) at 2.9905%. The USD drifted getly lower with GBP and EUR strength the biggest drivers. Commodities saw Gold and even more Silver jump at the open then drift while copper and oil limped higher. Volume in stocks was 20% below last Boxing Day which provided the perfect recipe for a VIX smack-down, slow meltup rally to new record-er highs.
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The latest overnight meltup which has pushed the DJIA and S&P to new implied record opens has been driven by, what else, the falling Yen, which after tumbling to fresh new 5 year lows following the release of the BOJ minutes (which said nothing new), has sent both the Nikkei higher by 1%, to post-2008 highs of 16,174, while the S&P, up about 5 points just shy of 1840, and has only three trading days in which it should close the gap to the central banks' price target of 1900 as we first showed in April. In the absence of any actual newsflow (we now live in a world in which both good and bad news are P/E multiple beneficial, just continue keeping an eye on the EURJPY and the USDJPY - these are the only two signals tht matter for the market.
From the first headline to the last, the following brief month-by-month summary of the year shows just how far markets and global happenings have come...
VIX closed at its lowest in a month as stocks pushed on higher to new record-er highs (and Twitter hit $70). The Nasdaq underperformed today (after yesterday's outpeformance) as the Dow, S&P, and Russell all closed around 0.4% higher (and Twitter added 8.2%). Treasury bond yields rose notably all day with the 10Y at its 2nd highest closing yield of the year +5.4bps to 2.98% today (but Twitter is almost a double off its lows in 2 weeks). Commodities drifted higher all day with Gold back over $1200 (and that so-called fat finger in copper leaving it up large still on the day). The USD ended unch with slight weakness in JPY. From the Taper lows, the S&P is up 3.7% (but Twitter is up 30% in that period).
UPDATE: Silver prices just spiked higher also.
The last few months have seen Gold futures halted numerous times. Last week we saw stock futures collapse very rapidly in the middle of the night only to bounce aggressively. Yesterday it was the Treasury Futures turn to melt-up. Today, Copper futures just exploded 4.2% higher in a split second as huge volumes hit the COMEX. And then minutes later, it fades back.
*COPPER FUTURES JUMP AS MUCH AS 4.2%, REACH $3.4475 A POUND, HIGHEST SINCE APRIL
We are sure it will be blamed on a "fat finger" but once again it suggests the algos are losing control of the asylum... Makes perfect sense to try and buy 1100 contracts in 30 seconds on Christmas Eve... so much for fiduciary duty (cue "busted trades" headline).
- Edward Snowden, after months of NSA revelations, says his mission’s accomplished (WaPo)
- Japan’s Nikkei 225 Extends Six-Year High on U.S. Data (BBG)
- Retailers blend stores, e-commerce to snag holiday stragglers (Reuters)
- Storm wreaks havoc in Britain, France ahead of Christmas (Reuters)
- Big Rally to Pump Up Wall Street Bonuses (WSJ)
- Obamacare Sign-Up Extended as Record 1 Million Use Site (BBG)
- Merkel Hits Wall With Europe Fix (WSJ)
- Boaz Weinstein Loses for Second Year as European Bet Sours (BBG)
- UniCredit has reached an agreement to sell almost €1 billion in nonperforming loans to Cerberus (WSJ)
- U.S. mortgage applications fall as refinance hits five-year low (Reuters)
- Cohen Said to Have Warned Friend About Possible Federal Investigation (NYT)
- ‘Duck Dynasty’ Dad Risks $500 Million With Gay-Sin Remark (BBG)
While shortened Christmas Eve trading is traditionally the lowest volume day of the year, based on recent trends it may be difficult for today's action to stand out from the landscape thanks to an ongoing volume collapse, which however should make the even more traditional low-volume melt up that much easier. Sure enough, futures are modestly higher driven by their favorite signal, the EURJPY. Not surprisingly there has been particularly light newsflow with market closures in Germany, Italy and Switzerland in addition to early market closures for UK, France, Netherlands and Spain. Those markets that are open are trading in positive territory with the FTSE 100 being supported by BSkyB following an upbeat pre-market report for the company and their customer base, whilst the IBEX 35 is being supported by the financial sector. Overnight in China there was news of an injection of CNY 29bln via a 7-day reverse repo, although market commentators have said that this is more of a gesture than any meaningful intervention given the size of the country's banking market. Fixed income markets are particularly light with there being no trade in the bund future given the Eurex closure, with other trading products relatively flat given the lack of newsflow. However, the short-sterling curve has bear-steepened and thus continuing the trend seen since the end of last week as a result of both UK unemployment and UK GDP coming in better than expected.
Watching Indian bureaucrats attempt to halt more than one billion human beings’ desire for gold has been one of the more entertaining and pathetic stories of all of 2013. As we noted previously, gold smuggling has now outstripped the illegal drug trade but it appears the trend continues, potentially at an accelerated rate, as we just learned that, incredibly, “almost every passenger on a flight from Dubai to Calicut was found carrying 1kg of gold.” As I have said many times in the past, if an Indian wants their gold, they will have their gold.
HFT Pays: CEO Of Firm That Accounts For 5% Of US Equity Volume Selling His NY Mansion For $114 MillionSubmitted by Tyler Durden on 12/23/2013 18:22 -0500
Everyone knows that the most parasitic form of trading, that would be high frequency trading for those who may not have followed this website since 2009, is very profitable. Well, it is certainly profitable for those who operate the momentum-igniting, quote churning, HFT firms in control of what's left of the "market", if not so much for anyone else. Just how profitable is it? Judging by the house that Vincent Viola, head of Virtu Financial, one of the largest high frequency electronic trading and market making firms, which according to Cifu accounts for more than 5% of US equities volume and over 10% of the of the average daily volume of MSFT, and which tried to expand even more aggressively with a failed bid for Knight Capital last year, has just put on the block.
Another day, another low volume overnight meltup to record highs in equity futures. Stocks traded higher in Europe this morning, with tech stocks outperforming following reports that Apple has finally secured a deal to bring the iPhone to China Mobile, which has more than 750 million subscribers. As a result, the likes of ARM Holdings and STMicro traded with gains of over 2% and Apple's German listing traded up around 2.5%. At the same time, French CAC index under performed its peers, with Technip among the worst performing stocks after being removed from Goldman's Sustained Focus List. Addtionally, over the weekend, the ECB's Praet said that the ECB is ready to intervene if credit contracts - and since Euro credit is contracting at a record pace, we wonder what he is waiting for. This happened as Fitch affirmed France at AA+, outlook stable. Looking elsewhere, thin trading conditions resulted in an aggressive spike higher in CME US 30y futures this morning after a large clip was traded, which consequently saw the exchange adjust prices lower, but did not bust any trades.
Overnight one of the main stories is that the European Union has been downgraded to AA+ from AAA by S&P. While the market digests the impact of the downgrade, all eyes remain on the US treasury market. As Deutsche Bank notes, treasuries are increasingly being viewed as a potential sign of the success or not of the Fed taper in early 2014. From the lows in the immediate aftermath of Wednesday’s FOMC, 10yr UST yields have added more than 10bp. Yields continue to leak this morning (-2bp to 2.95%) though we’re still hovering at levels last seen in early September just before the Fed surprised markets with its non-taper. Despite this, US equities and credit were both reasonably well supported yesterday. However the combination of higher UST yields and a stronger dollar resulted in a fairly difficult day for EM. In EMFX, the Brazilian Real fell 1.1% against the USD, underperforming most other EM currencies. The move was exacerbated by the announcement from the BCB that it would wind back its intervention in the currency market, following the initial positive reaction to tapering on Wednesday. Other EM currencies also struggled including the TRY (-0.7%), MXN (-0.7%) and IDR (-0.3%). A number of EM equity markets struggled including in Poland (-0.7%) and Turkey (-3.5%).
If yesterday's price action in the moments following (and preceding) the FOMC announcement was just a little suspicious, with a seemingly endless supply of VIX selling originating as if from nowhere (or perhaps the 9th floor of Liberty 33) the morning after has so far been a snoozer. Perhaps this is to be expected following the third biggest one-day surge in the stock market in the year (1st = Jan 2nd, 2nd = October 10th), or perhaps the market is finally focusing on Bernanke's tongue in cheek suggestion that the taper may be lowered by $10 billion per month (we disagree as described previously). Or perhaps the creep higher in 10 Year yields, at 2.915% at last check and just shy of the 3.00% psychological level, is finally being noticed. Or perhaps the fact that China, very surprisingly, is also tapering concurrently is finally being appreciated as is the fact that despite all talk of preparedness, developing economies were hardly left unscathed following yesterday's development. Whatever the reason, the euphoria this morning has "tapered."
We think not as increasing signs of corporate distress in China will weigh on emerging market growth.
- MOAR: BOJ Said to See Significant Room for More Bond Purchases (BBG)
- Meltdown Averted, Bernanke Struggled to Stoke Growth (Hilsenrath)
- New Mortgages to Get Pricier Next Year (WSJ)
- Republicans to Seek Concessions From Obama on Debt Limit (BBG)
- Hunting for U.S. arms technology, China enlists a legion of amateurs (Reuters)
- Jury Begins Deliberating in Case of SAC Portfolio Manager (WSJ)
- BP to Write Off $1 Billion on Failed Well (WSJ)
- Rajan Unexpectedly Keeps India Rates Unchanged to Support Growth (BBG)
- Thai protesters say they will rally to hound PM from office (Reuters)
- SEC Brings Fewer Enforcement Actions, Slows Early-Stage Probes (WSJ)