With the FOMC Minutes in the books, the only remaining major event for the week is the Jackson Hole conference, where Yellen is now expected to talk back any Hawkish aftertaste left from the Minutes, and which starts today but no speeches are due until tomorrow. And while the Minutes were generally seen as hawkish, stocks continue to levitate, blissfully oblivious what tighter monetary conditions would mean to an asset bubble, which according to many, is now the biggest in history. And speaking of equities, US futures climbed to a fresh record high overnight on just the right mix of bad news.
The last 2 days have seen the USD index rise at its fastest pace in almost 4 months, closing in on 1-year highs. Led by JPY and EUR weakness, the USD is up over 1% this week (which is set for the best week in 9 months). While stocks shrugged off the hawkish minutes initial kneejerk lower and surged towards new record highs, credit markets were not as exuberant about the great suck out of liquidity (and how they'll manage to roll the wall of debt forthcoming). VIX was slammed back to one-month lows (even as the Fed admitted greater uncertainty) slamming stocks higher. Treasury yields rose notably (with the short-end underperforming) as 2Y-5Y up 5-6bps, 10-30Y up 1-3bps. Gold and silver drifted modestly lower and oil jerked higher. Copper was up from earlier on China restocking rumors. Into the close, stocks faded quickly - rather disappointingly ruining mainstream media's "new record high" headlines. Janet, save us....
- Ferguson at Turning Point After Night of Relative Calm (BBG)
- Gaza war rages on, Hamas says Israel tried to kill its military chief (Reuters)
- Surge in Putin Patriotism Masks Pain of Sanctions (BBG)
- Bank of England splits over rate hike for first time in 3 years (Reuters)
- Putin Meeting Leaves Kiev With Tough Choices (WSJ)
- European Gas Reverses Biggest Drop Since 2009 on Ukraine (BBG)
- "Isolation" Mongolia Seeks Economic Lifeline With Pivot to China, Russia (BBG)
- Uber Picks David Plouffe to Wage Regulatory Fight (NYT)
- China Levies Record Antitrust Fine on Japanese Firms (BBG)
While everyone's (algorithmic) attention will be focused on today's minutes from the July 29-30 FOMC meeting for views on remaining slack in U.S. economy following recent changes in the labor market (especially a particularly solid JOLTS report which indicates that at least on the openings front, there is no more) and any signal of policy change by the Fed ahead of Fed Chair Janet Yellen’s speech in Jackson Hole on Aug. 22, a curious thing happened overnight when a few hours ago the BoE's own minutes show the first vote split since 2011, as Weale and McCafferty argue for a 0.75% bank rate. Then again, if the Russians are finally bailing on London real estate, the inflationary pressures at the top of UK housing may finally be easing. In any event, every FOMC "minute" will be overanalyzed for hints of what Yellen's speech on Friday morning will say, even if stocks just shy of all time highs know quite well she won't dare say anything to tip the boat despite her warnings of a biotech and social network bubble.
S&P futures traded the lowest volume of the year today (for a non-holiday trading day) and volume has slid consistently lower as this rally of the last 8 days. The S&P outperformed today (up over 0.5%) as yesterday's oil-is-falling-so-buy-Trannies meme reversed into oil-is-falling-so-sell-Trannies which ended the day almost unchanged. The Nasdaq made new 14-year highs, up 5 days in a row. Treasury yields dropped notably early on then surged higher as US stocks opened (30Y +8bps on the week). The USD index also surged today (up 0.55% on the week) to new 11-month highs as EUR and CHF weakened notably. Commodities in general were clubbed like baby seals with copper, silver, and WTI hammered (but not Brent) after the inflation/housing data leaving oil under $95 - its lowest in 7 months. Gold fell much more modestly (but ended below $1300). AAPL closes at all-time high. VIX and HY Credit diverge notably from stocks after Europe closed.
With global GDP expectations plumbing new depths (at 2.48% consensus for 2014), one could understand why it is that 30Y US Treasury yields are at 16-month lows, that Dr.Copper is tumbling, and crude oil prices slumping. But apart from the fundamentals of global macro strength, what - at almost record highs - does the US equity market know that every other asset class does not...
A quick reminder of how geopolitics governs markets: on Friday, the market plunged 0.005% over fears Ukraine and Russia may be about to go at it all out after a fake report Ukraine shelled a Russian military convoy. On Monday, the same "market" soared just under 1% as the news that had caused the "crash" was refuted. That has been the dominant rinse, repeat theme for the past month and will continue to be well after Yellen's Friday speech at Jackson Hole (although one does wonder why she is not speaking on Wednesday when the symposium begins). Not surprisingly, with only modest re-escalation news overnight (that Russia is preparing further retaliatory sanctions against the West), which is simply "pent up de-escalation" in the eyes of Keynesian algos, futures are again up a solid 0.2% and rising, and the way the rampy USDJPY is being manipulated before its pre-market blast off, we may well see the S&P hit 1980, if not a new all time high before 9:30am, let alone during today's cash session. In any event, whatever you do, don't you dare suggest that algos should care one bit about Ferguson and its implications for US society.
- Yellen Dashboard Warning Light Glows as Millions Work Part Time (BBG)
- More US drones boosting global GDP: Unidentified war planes, explosions heard in Libyan capital (Reuters)
- London Home Asking Prices Plunge Most in More Than Six Years (BBG)
- Carney - Rate Hike before Pay Recovers (Times)
- No Fed fireworks, but plenty of clues, expected at Jackson Hole (Reuters)
- Kurdish, Iraqi forces in control of Mosul dam (Reuters)
- China Pushes Cleanup of Banks (WSJ)
- Russia Widens Ruble Trading Band in Move Away From Managed Rate (BBG)
- Dollar General Makes $9.7 Billion Family Dollar Counterbid (BBG)
- Autopsy finds unarmed teen killed by police was shot six times (NYT)
- Bull Market Waning as Barclays Sees 1% Gain for S&P 500 (BBG)
- Credit Suisse Caught Up in Espírito Santo Mess (WSJ)
Friday's main event, Ukraine's alleged attack of a Russian military convoy, has come and gone, and as we mused on Friday has promptly faded into the memory of all other fabricated headlines released by the country engaged in a major civil war and an even more major disinformation war. To be sure, Germany's DAX has recovered virtually all losses, US futures are up about 9 points, and the 10 Year is back to 2.37%. One wonders what algo-slamming headline amusement Ukraine has in stock for us today, although anyone hoping for a quick "de-escalation" (there's that word again) will have to wait following yesterday's meeting of Russian, Ukraine, German and French ministers in Berlin where Russia's Lavrov said he saw no progress on Ukraine cease-fire, Foreign Minister Sergei Lavrov says in Berlin, adding that a cease-fire should be unconditional.
There is a standard view of energy and the economy that can briefly be summarized as follows: Economic growth can continue forever; we will learn to use less energy supplies; energy prices will rise; and the world will adapt. The following view of how energy and the economy fit together is very different - it is based on the principle of reaching limits in a finite world.
Despite NATO's warnings of Russian escalation in Ukraine, 8amET was a far bigger catalyst for precious metals this morning as the once ubiquitous morning meltdown is back. With gold relatively flat and Treasury yields down 10bps after a 60 point S&P surge, maybe this is catch-down but the heavy-volume plunge in Gold and Silver is notable in that USDJPY appeared to jerk higher at the same time.
Futures Continue Levitation On More "Deescalation" Hopes Despite UK Warning Russia Of "Serious Consequences"Submitted by Tyler Durden on 08/15/2014 07:05 -0400
There were headlines for everyone this morning, but especially for fans of what is increasingly known as Russia's "Schrodinger Invasion" of East Ukraine: one which may or may not be happening depending on i) one's point of view and ii) how one is observing it.
When considering the catalysts for silver, let’s first ignore short-term factors such as net short/long positions, fluctuations in weekly ETF holdings, or the latest open interest. Data like these fluctuate regularly and rarely have long-term bearing on the price of silver. We're more interested in the big-picture forces that could impact silver over the next several years. The most significant force, of course, is governments’ abuse of “financial heroin” that will inevitably lead to a currency crisis in many countries around the world, pushing silver and gold to record levels; but here are seven more...
Overnight weakness in Japan and Europe was no big catalysts for markets either way, but the moment Vladimir Putin uttered the words "avoid conflict" (as ooposed to saying 'destroy all of you'?), stocks took off. Weak jobless claims data sparked a dump but once cash markets opened, it was on like donkey kong as the worst volume day of a terrible volume week took stocks higher on the back of USDJPY. For the technically-minded, the S&P is testing up to its 50-day moving-average (DMA), Russell finding resistance at 100/200DMA, Trannies broke back above the 50DMA, and Nasdaq is on course for new highs. All this exuberance in stocks was shared by bonds as buyers bid 30Y yields to a 3.18% handle - lowest in 15 months (gaping divergence to stocks this week). USD oscillated but ended unch. Gold and silver limped higher as copper and crude were monkey-hammered. VIX ended at 3-week lows (after an opening slam lower) for day 15 of inversion. S&P futures volume 55% below average.
Despite global geopolitical crises exploding among the world's biggest producers of oil, WTI (and Brent) crude oil prices have tumbled to 5-month lows (WTI At $96). Despite the exuberant PMIs in China, Copper and Iron ore prices are collapsing (2-month lows). One can't help but wonder what global 'economic growth' must really be like if 'demand' for all these crucial growthy commodities looks so weak?