Everything went from bad to worse once Europe opened, and things started going "bump in the morning" across the European banking sector, where not only has it been more of the same with CDS spreads for major banks - most notably Deutsche Bank - continuing their surge wider, but also EM spreads to Bunds all following, with the Portugal-Germany Yield spread blowing out above 300 bps for the first time since 2014, and other peripheral nations following.
"... When stocks are falling this much, it's hard to justify not acting"
"... Davos - where he mingled with central bankers such as ECB President Mario Draghi and leading company executives - likely prompted him to pull the trigger"
"The BoJ actions should lead to further intensification of global currency wars with central banks around the world trying to engineer sustained competitive devaluation against the background of slowing global trade and growth as well as persistent commodity price disinflation. With its latest measures the BoJ will allow Japan to borrow more growth from its trading partners and limit the severity of the imported disinflation."
At this point, the longer China does nothing, the greater its problems will become. As such Beijing needs to choose: either collapse the economy in a deflationary wave, leading to a debt crisis and widespread social unrest, or devalue massively overnight in hopes of stimulating inflation, leading to collapsing profit margins, and even more widespread social unrest.In short, our condolences China: having decided to adopt Western neo-Keynesian economics, with the typical monetarist bent, you too are now trapped with no way out. But don't worry: so is everyone else. Good luck.
"The trouble is that rents are running high not because house prices are booming and/or construction is sawing but because structurally new entrants to the housing market are renters not owners. This is reflected in the very low first time homebuyer rate, less than 30 percent."
- Oil heads for third straight weekly loss as supply weighs (Reuters)
- BOJ's $2.5 Billion ETF Boost Seen Having Little Impact on Stocks (BBG)
- Japan core CPI seen flat in November, household spending down (Reuters)
- Dollar gets altitude sickness as BOJ disappoints (Reuters)
- Fed Hikes, but Some Rates Veer Lower (WSJ)
- White House calls for 'common sense steps' to help Puerto Rico (Reuters)
"The party's over and bond investors who always tend to be more sober types, realize this and have headed for the exits whereas equity investors are so intoxicated they haven't realized that the music has stopped. Equity investors are still gyrating around the dance floor - just as in 1999 and 2007... I believe the Yellen Fed will soon be treated with the same contempt the Greenspan Fed was in the aftermath of the 2008 financial crisis. And they will deserve it."
Just hours before the FOMC sits down in the Marriner Eccles to discuss just how it will announce the first rate hike in 9 years, 7 years to the day after it cut rates to zero, it got the best gift from the BLS it could have asked for: core inflation rose precisely the amount the Fed wanted from a year ago, ot 2.0% on the dot, the highest annual core CPI increase in the past year. Why the jump? "About two-thirds of this increase is accounted for by the shelter index, which rose 3.2 percent over the span."
Price for Thanksgiving dinner pre-Fed: $0.50
Price for Thanksgiving dinner 102 years after establishement of the Fed: $50
What do you do when you're a government statistician and the economic data doesn't say what you want it to say? Why you "adjust" it of course.
Just a day after a dismal read on GDP, the latest data out of Brazil shows a spike in both inflation and unemployment, as the country's economic outlook continues to deteriorate at an alarming pace.
- Top Trade #1: Long USD vs short EUR and JPY
- Top Trade #2: Long US 10-year ‘Breakeven’ Inflation
- Top Trade #3: Long MXN and RUB versus short ZAR and CLP.
- Top Trade #4: Long EM ‘External Demand’ vs. Banks stocks
- Top Trade #5: Tighter Spread between Italy and Germany Long Rates
- Top Trade #6: Long large-cap US Banks relative to the overall S&P500
Following September's strongest Core CPI gain since June 2014, October accelerated that modestly with CPI ex food and energy rising 1.9% YoY. Broad CPI rose 0.2% YoY (slightly better than the 0.1% expected rise) - the highest sicne December. Month-over-month saw new and used vehicle prices drop, Apparel prices drop 0.8% (most since Dec 2014), PCs drop 0.9%, but was notably offset by the bigger-weighting in Medical Care which rose 0.7% MoM (3.0% YoY) and Shelter rose 3.2% YoY.
On the heels of placing its third former employee at the Fed this year alone, Goldman explains why the market is wrong about inflation and whyv a handful of ex-Goldmanites will hike by 200bps in the next two years.
Back in September we explained why, contrary to both conventional wisdom and the BOJ's endless protests to the contrary, neither the BOJ nor the ECB have any interest in boosting QE at this - or any other point - simply because with every incremental bond they buy, the time when the two central banks run out of monetizable debt comes closer. Since then the ECB has jawboned that it may boost QE (but it has not done so), and overnight as reported previously, the BOJ likewise did not expand QE despite many, including Goldman Sachs, expecting it would do just that.