What’s the true risk for the global economy? Its pronounced: /d??fl?SH(?)n/
And the overnight futures ramp started off so promising.
If there is a cabal running things, they are not doing a good job. Maybe they are not really running things. Here is what next week looks like if we did not know it was all pre-determined.
The Fed’s public relations firm of Hilsenrath & Blackstone was out this morning with the official line on the market’s tremors of recent days. It seems that $10 trillion in freshly minted digital money at the world’s major central banks over the last eight years—-that is, a tripling of their balance sheets to $16 trillion—- is not enough. Not only is 2% inflation still MIA, but it now threatening to enter the dark side: Behind the spate of market turmoil lurks a worry that top policy makers thought they had beaten back a few years ago: the specter of deflation. Never mind that there is nothing close to a sustained run of negative consumer price indices anywhere in the world.
Yesterday afternoon's "recovery" has come and gone, because just like that, in a matter of minutes, stuff just broke once again courtsy of a USDJPY which has been a one way liquidation street since hitting 106.30 just before Europe open to 105.6 as of this writing: U.S. 10-YEAR TREASURY YIELD DROPS 15 BASIS POINTS TO 1.99%; S&P FUTURES PLUNGE 23PTS, OR 1.2%, AS EU STOCKS DROP 2.54%.
Only this time Europe is once again broken with periphery yields exploding, after Spain earlier failed to sell the maximum target of €3.5 billion in bonds, instead unloading only €3.2 billion, and leading to this: PORTUGAL 10-YR BONDS EXTEND DROP; YIELD CLIMBS 30 BPS TO 3.58%; IRISH 10-YEAR BONDS EXTEND DECLINE; YIELD RISES 20 BPS TO 1.90%; SPANISH 10-YEAR BONDS EXTEND DROP; YIELD JUMPS 29 BPS TO 2.40%.
And the punchline, as usual, is Greece, whose 10 Year is now wider by over 1% on the session(!), to just about 9%.
For the fourth consecutive night, futures attempted to storm higher, and were halted in their tracks when the USDJPY failed to rebound from the recalibrated 107 tractor beam, following a statement by the BOJ's former chief economist and executive director (until March 2013) who said that now is the time for the Bank of Japan to begin tapering. Needless to say, there could be no worse news to bailout and liquidity-addicted equities as the last thing a global rigged market can sustain now that QE is about to end in two weeks, is the BOJ also reducing its liquidity injections in the fungible world. This promptly took away spring in the ES' overnight bounce. Not helping matters is the continuing selloff in oil, which as we reported first yesterday, has hit the most oversold levels ever, is not helping and we can only imagine the margin calls the likes of Andy Hall and other commodity funds (ahem Bridgewater -3% in September due to "commodities") are suffering. But the nail in the coffin of the latest attempt by algos to bounce back was the news which hit two hours ago that a second Ebola case has been confirmed in Texas, and just as fears that the worst is over, had started to dissipate.
Futures Euphoria Deflated By Latest Batch Of Ugly European News: Germany Can't Exclude "Technical Recession"Submitted by Tyler Durden on 10/14/2014 06:47 -0400
So far the overnight session has been a mirror image of Monday's, when futures languished at the lows only to ramp higher as soon as Europe started BTFD. Today, on the other hand, we had a rather amusing surge in the AUDJPY as several central banks were getting "liquidity rebates" from the CME to push the global carry-fueled risk complex higher, only to see their efforts crash and burn as Europe's key economic events hit. First, it was the Eurozone Industrial Production, which confirmed that the triple dip is well and here, when it printed -1.8%, below the expected -1.6%, and far below last month's 1.0%. This comes in the month when German IP plunged most since 2009, confirming that this time it's different, and it is Germany that is leading Europe's collapse into the Keynesian abyss not the periphery. And speaking of Germany, at the same time Europe's former growth dynamo released an October ZEW survey of -3.6%, the 10th consecutive decline and well below the 0.0% expected: first negative print since late 2012!
The old adage that if something is repeated often enough it is soon assumed to be true couldn’t be more apt with respect to the Fed’s 2% inflation target. That Keynesian central bankers peddle this nostrum with a straight face is amazing in itself, but it is at least understandable because it gives them a reason to keep the printing presses humming. That journalists repeat it with no questions asked is even more remarkable. It proves that the impending replacement of financial journalists with robo-writers may not be so bad after all. It won’t make any real difference.
"So bye bye to my piece of the pie... I poured my paycheck into the Russell, Now my cash account's dry... It's just one month from a new all-time high, And now we're right back where we were in July..."
Today US activity will be very light given the Columbus Day holiday. As DB summarizes, we have a relatively quiet day for data watchers today but the calendar will pick up tomorrow and beyond with a big focus on inflation numbers amongst other things. Indeed tomorrow will see the release of Germany’s ZEW survey alongside CPI prints from the UK, France and Spain. Wednesday’s data highlights will include the US retail sales for September, the Fed’s Beige Book, CPI readings from China and Germany, US PPI, and the NY Fed Empire State survey. Draghi will speak twice on Wednesday which could also be a source for headlines. On Thursday, we will get Industrial Production stats and the Philly Fed Survey from the US on top of the usual weekly jobless claims. European CPI will also be released on Wednesday. We have the first reading of October’s UofM Consumer Sentiment on Friday along with US building permits/housing starts. Yellen’s speech at the Boston Fed Conference on Friday (entitled “Inequality of Economic Opportunity”) will also be closely followed.
With futures slamming the lows at their open yesterday evening, touching levels not seen since May, and with the EuroStoxx 50 officialy entering correction just hours ago, down 10% from the June highs, many were wondering if the NY Fed's Chicago Trading Desk, aka Overnight Ramp Capital LLC, would be put in damage control duty and send futures right back to unchanged (because with new Ebola patient alerts springing up everywhere from Boston to Los Angeles, the pandemic is clearly contained). The answer, with a whopping 20 point levitation on no volume, and futures which are pointing now well into the green (not to mention the Eurostoxx rebounding off the lows and now green too), is a resounding yes (thank the AUDJPY, which is over 100 pips off the overnight lows and back over 94).
Hearing of IMF interventions generally conjures up images of developing nations (and the occasional Eurozone peripheral economy of late) facing some kind of financial difficulty. But it was actually Great Britain, the cradle of the industrialized world, which in 1976 became one of the first countries ever to be "bailed out" by the IMF in the modern sense of the term.
The job market is tightening, and by any normal measure interest rates should be following suit and rising as well regardless of whether the US Dollar also strengthens.
- IRELAND SELLS 10-YEAR BONDS AT RECORD-LOW YIELD OF 1.63%
- GERMAN 10-YEAR BUNDS RISE; YIELD FALLS 2 BASIS POINTS TO 0.88%
- DUTCH 10-YEAR GOVERNMENT BOND YIELD DROPS TO RECORD-LOW 1.021%
- PORTUGUESE 10-YEAR BOND YIELD DROPS TO RECORD-LOW 2.942%
- FRENCH 10-YEAR GOVERNMENT BOND YIELDS DROP TO RECORD-LOW 1.214%
- U.S. 10-YEAR NOTE YIELD DROPS TO 2.296%, LOWEST SINCE JUNE 2013
- SPANISH 10-YEAR BOND YIELD DROPS TO RECORD-LOW 2.038%
- FINNISH 10-YEAR YIELD DROPS TO 1% FOR FIRST TIME ON RECORD
If by means of monetary pumping one could strengthen the economic growth then it would imply that - by means of monetary pumping - it is possible to create real wealth and generate an everlasting economic prosperity. This would also mean that world wide poverty should have been erased a long time ago. After all, most countries today have central banks that possess the skills to create money in large amounts. Yet world poverty remains intact. The artificial boosting of the demand by means of monetary pumping leads to the depletion of the pool of real wealth. It amounts to adding more individuals that take from the pool of real wealth without adding anything in return - an economic impoverishment.