"We think that something structurally has changed since the GFC, a change that seems destined to continue to hold back growth in the near-term and more worryingly has lowered the longer-term trend rate of growth. In the absence of structural reforms, a lack of appetite for debt restructuring and no ability to pursue more aggressive fiscal policy, the temptation will be strong globally to continue to throw liquidity at the problem which is likely to continue to have more impact on asset prices than the actual economy. Bubbles could easily form which could ultimately be the catalyst for the imbalances that will likely lead to the next recession or crisis... Our base case is that the world needs low yields and high liquidity given the huge amount of outstanding debt that we’re still left with post the leverage bubble and the GFC. There’s still too much leverage for us to believe that accidents won’t happen with the removal of too much stimulus. If we’re correct, we may see a reaction somewhere to tapering and this in turn may force the Fed into a much slower tapering path than it wants."
- U.S. set to adopt Volcker rule to curb bank trading gambles (Reuters) After vote, lawsuits likely next hurdle for Volcker rule (Reuters)
- U.S. Congress budget talks could produce Tuesday deal, aides say (Reuters)
- Wealthy Go Frugal This Holiday Amid Uneven U.S. Recovery (BBG)
- Tearful Thai PM urges protesters to take part in election (Reuters)
- Fed’s Bullard Sees Higher QE Taper Odds as Labor Market Improves (BBG)
- Coeure Says ECB Would Offer More LTROs Only When Banks Can Lend (BBG)
- Inside China's Super-Sterile Chicken Farms (WSJ)
- Mandela Service Rivals JFK’s as Leaders Meet in South Africa (BBG)
- China data defy slowdown forecasts (FT), and of course the word is "data"
- Cold, ice grip U.S. as more snow to blanket East (Reuters)
The grind higher in equities, and tighter in credit, continues as markets brush aside concerns about a December taper for the time being. Overnight futures levitation has pushed the Fed balance sheet driven record high S&P even higher, despite as Deutsche Bank points out, the fact that we had three Fed speakers advocate or talk up the possibility of a December taper, including the St Louis Fed’s James Bullard who is viewed as a bit of a bellwether for the FOMC. Bullard said the probability of a taper had risen in light of the strengthening of job growth in recent months. Indeed, he noted that the best move for the Fed could be a small December taper given the improving jobs data but below-target inflation readings. The Fed could then pause further tapering should inflation not return toward target during the first half of 2014. Looking at today’s calendar, the focus will be on US JOLTs job openings - a report which Yellen has previously highlighted as an important supplement to more traditional labour market indicators. US small business optimism and wholesale inventories are the other major data releases today. As mentioned above, US financial regulators are due to announce Volcker rules at some point today although as we just reported, the CFTC's meeting on Volcker was just cancelled due to inclement weather.
- Glass-Steagall Fans Plan New Assault If Volcker Rule Deemed Weak (BBG) ... "if"? The banks control the legislators and regulators...
- Cellphone data spying: It's not just the NSA (USA Today)
- Major tech companies push for limits on government surveillance (Reuters)
- Shanghai Warns Kids to Stay Indoors for Seventh Day on Smog (BBG)
- Protesters fell Lenin statue, tell Ukraine's president 'you're next' (Reuters)
- Everyone must be flying private these days: EADS to cut 5000-6000 jobs, close Paris HQ in restructuring (FT)
- Big Players Trade 'Upstairs' (WSJ)
- There’s no way to tell how many people who think they’ve signed up for health insurance through the U.S. exchange actually have (BBG)
- Slower China inflation reduces worries of tighter policy (Reuters)
Futures Pushed Higher On Weaker Yen, But All Could Change With Today's "Most Important Ever" Jobs NumberSubmitted by Tyler Durden on 12/06/2013 07:58 -0400
The latest "most important payrolls day of all time" day is finally upon us. Of course, this is a ridiculous statement: considering that the average December seasonal adjustment to the actual, unadjusted number is 824K jobs, it will once again be up to the BLS' Arima X 13 goal-seeking, seasonal adjusting software to determine whether the momentum ignition algos send stocks soaring or plunging, especially since the difference between up and down could be as small as 30K jobs. As Deutsche Bank explains: " today's number is probably one where anything above +200k (net of revisions) will lead to a further dip in risk as taper fears intensify and anything less than say +170k will probably see a decent relief rally after a tricky week for markets. Indeed yesterday saw the S&P500 (-0.43%) down for a fifth day - extending a sequence last seen in September." And then consider that nearly 30 times that difference comes from seasonal adjustments and it becomes clear why "farcial" is a far better definition of labor Friday.
It is amazing what a few short months of intense regulatory scrutiny, a few multi-billion fines, and the occasional janitorial arrest can do to fraudulent bank business lines. First, recall that as we showed a week ago, and as we have been saying for the past five years, banks were recently "found" to manipulate, in a criminal sense, pretty much everything. Then recall that yesterday the European Union lobbed the biggest monetary fine in history against bank cartel behavior, with the guiltiest party, at least based on monetary amounts, being Deutsche Bank. So now that outsized profits as a result of illegal "trading" become virtually impossible to procure, what is a self-respectable criminal enterprise to do? Why shut down all formerly infringing lines of business of course. Which is what Deutsche Bank just did, which announced a few hours ago that it has pulled the plug on its global commodities trading business, cutting 200 jobs in the process (200 jobs that will certainly be able to find a job in a jurisdiction where criminal trading behavior is still not as intensely scrutinized).
- Apple, China Mobile Sign Deal to Offer iPhone (WSJ)
- Japan approves $182 billion economic package, doubts remain (Reuters)
- Volcker Rule Won't Allow Banks to Use 'Portfolio Hedging' (WSJ)
- He went, he saw, he achieved nothing: Biden's Trip to Beijing Leaves China Air-Zone Rift Open (WSJ)
- Britain announces sharp upward revision to growth forecasts (Reuters)
- U.S. Airlines to Mortgage-Backed Debt Top List of Best ’14 Bets (BBG)
- Thaksin's homecoming hopes dashed as Thai crisis reignites (Reuters)
- Age of Austerity Nearing End May Boost Global Economy (BBG) - or it may expose that it was just corruption and incompetence at fault all along
- China aims to establish network of high-level FTAs (China Daily)
- Deutsche Bank gets biggest combined penalty of €725.4mln.
- SocGen fined €445.9mln for Euribor manipulation.
- RBS agrees to pay €391mln in cartels
- JPMorgan fined €79.9mln in JPY LIBOR case.
- R.P. Martin Holdings Ltd fined €247,000
- UBS and Barclays escape fines as EU whistle-blowers.
- EU Fines Financial Institutions Over Fixing Key Benchmarks (Reuters)
- Euro-Area Economic Growth Slows as Exports, Consumption Cool (BBG) - someone has a very loose definition of growth
- Ukraine Officials Scour Globe for Cash as Protests Build (BBG)
- Oops: Franklin Boosted Ukraine Bet to $6 Billion as Selloff Began (BBG)
- Japan Plans 18.6 Trillion Yen Economic Package to Support Growth (BBG) - or about 2 months of POMO
- How Peugeot and France ran out of gas (Reuters)
- Iran threatens to trigger oil price war (FT)
- Abe Vows to Pass Secrecy Law That Hurts Cabinet’s Popularity (BBG)
- Brazil economy turns in worst quarter for 5 years (FT)
- Australia’s Slowdown Suggests RBA May Need to Do More (BBG)
- Biden calls for trust with China amid airspace dispute (Reuters)
While there was a plethora of macro data (starting with some ugly numbers out of Australia which clobbered AUD pairs overnight), China HSBC Services PMI dipping slighlty from 52.6 to 52.5, Final Eurozone PMI Services (printing at 51.2 up from 50.9 and beating expectations of the same on an increase in German PMI numbers from 54.5 to 55.7 and a decline in French PMI from 48.8 to 48.0), Eurozone retail sales declining by 0.2%, on expectations of an unchanged print, and much more (see below), perhaps the most important news of the day came from Japan which many expect will be the source of much more easing in the coming months and thus serve as marginal lever to push global fungible markets higher. However, not only did various BOJ officials for the first time in a while talk down expectations of a QE boost, but the head of the Japan GPIF said that it doesn't need to sell JGBs right now as it would "rock markets" and that instead can achieve its targeted 52% weighing as bonds mature, that it may buy foreign bonds instead to raise weighting to core target (as the Fed buys Japan bonds?), and that it will be very difficult for Japan to hit the BOJ's inflation target in 2 years. Is Japan already getting cold feet on rumors of more QE and did it realize there are only so many assets it can monetize. If so, watch out below on the EURJPY which has now priced in about 700 pips of expected BOJ QE boosting in early 2014.
- America’s Role as Consumer of Last Resort Goes Missing (BBG)
- Holiday sales sag despite blitz of deals (WSJ)
- Abe Support Falls Below 50% for First Time Amid Secrecy Drive (BBG)
- U.S. airlines give China flight plans for defense zone (Reuters), while Japan: no change to airlines' notification policy when flying in East China Sea zone (Reuters)
- Thai protesters seek to topple PM after clashes (Reuters)
- Hilton Seeks as Much as $2.4 Billion in Biggest Hotel IPO (BBG)
- Biden on delicate mission to defuse tensions in East Asia (Reuters)
- Fed eyes financial system weak link (WSJ)
- Pentagon in line of fire in US budget war (FT)
- China’s monetary squeeze collides with housing bubble (FT)
Asian equities have gotten off to a rocky start to the week despite some initial optimism around the twin-Chinese PMI beats at the start of the session. That optimism has been replaced by selling in Chinese equities, particularly small-cap Chinese stocks and A-shares after the Chinese security regulator issued a reform plan for domestic IPOs over the weekend. The market is expecting the reforms to lead to a higher number of IPOs in the coming quarters, and the fear is that this will bring a wave of new supply of stock to an already-underperforming market. Indeed, the Chinese securities regulator expects about 50 firms to complete IPOs by January 2014 – and another 763 firms have already submitted their IPO applications and are currently awaiting approval. A large number of small cap stocks listed on Hong Kong’s Growth Enterprise Market were down by more than 5% this morning, while the Shanghai Composite is down by 0.9%. The Hang Seng (+0.4%), Hang Seng China Enterprises Index (+0.8%) are performing better on a relative basis, and other China-growth assets including the AUDUSD is up 0.5%. The Nikkei (-0.1%) is also a touch weaker after Japan’s Q3 capital expenditure numbers came in well below estimates (1.5% YoY vs 3.6% forecast). Elsewhere Sterling continues to forge new multi-year highs against the USD (+0.3% overnight).
If October's stunning(ly low) inflation print of 0.7% is what conventional wisdom believes is the reason for the surprising ECB rate cut (it isn't - the culprit was the record low increase in private loan creation), then the just released modest increase in Eurozone November CPI, which was expected to print at 0.8%, instead rising just above that, or 0.9%, will likely mean less surprises out of the ECB in the future. Core CPI (excluding food, energy, alcohol and tobacco) rose 1.0%, following a 0.8% increase in October and 0.9% expected, while the biggest headline bounce was in energy prices which rose from -1.7% to -1.1%, if still rather negative. Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in November (1.6%, compared with 1.9% in October), followed by services (1.5%, compared with 1.2% in October), non-energy industrial goods (0.3%, stable compared with October) and energy (-1.1%, compared with -1.7% in October).
With the "inmates in charge of the asylum" during this holiday shortened trading week it seemed to be an apropriate opportunity to share a virtual cornucopia of topics to consider while enjoying the delicious delicacies, and subsequent tryptophan induced comas, of a traditional Thanksgiving.
- The second coming of Obamacare website - will it work? (Reuters)
- Winter Storm Moves North as Macy’s Waits to Make Parade Call (BBG)
- Eyeing holiday sales, more U.S. retailers to open on Thanksgiving (Reuters)
- It's all Verizon's fault: H-P Will Replace Verizon in Hosting HealthCare.gov Website (WSJ)
- Bitcoin Service Targets Kenya Remittances With Cut-Rate Fees (BBG)
- Embattled Thai PM easily survives no-confidence vote, protests persist (Reuters)
- For U.S. stores it is ugly out there: in more ways than one (Reuters)
- Japan and S Korea military flout China air zone rules (FT)
- UBS Restructuring Forex Unit (WSJ)
- Trader Messages Scrutinized as UBS Bans Chats Among Firms (BBG)
- ECB warns on external risks to eurozone financial system (FT)