Each year in November the Financial Stability Board releases is ranking of the 30 banks that pose the greatest systemic risk to the global financial system and the two at the top of 2016's list just might surprise some folks.
The EU fired a major global trade war tit-for-tat retaliation today against US banks and the UK in a single action. Brussels will raise costs for foreign lenders while simultaneously taking a pot shot at London.
"US will likely implement serious fiscal stimulus but without Fed QE. Europe will have no meaningful fiscal stimulus but lots of QE. Japan is a hybrid as it will have monetary policy that easily allows for more expansionary domestic fiscal policy. However there is some evidence to suggest that we’ll effectively have cross border helicopter money."
"2016 has been a landmark year as we seem to have reached a point where the faster the plates are spun the more the unintended short-term consequences... the global financial system remains broken and extremely fragile. Secular stagnation trends are everywhere. The world has too big a debt burden for the current growth environment.."
FX traders are pricing in as big a potential disruption event for Italy's referendum as they did (correctly) for the Brexit vote. So-called 'currency-vigilantes' are buying EURUSD protection across the Dec 4th date of the vote in size as Italian bond spreads (over Bunds) push to 30-month highs.
Mario Draghi just dropped the c-word. In his address to the EU Parliament, the ECB President explained that financial-stability risks are "for the time being, contained." Having admitted that Deutsche Bank is correct that negative rates certainly hurt bank profits, Draghi remains "committed to accomodative policy." But it was ECB executive board member Benoit Coeure that spoiled the party by rejecting the narrative of ECB stock buying.
The key economic releases this week in the Thanksgiving-shortened week are the durable goods report and new home sales on Wednesday. There are several scheduled speaking engagements from Fed officials this week. Minutes from the November FOMC meeting will be released on Wednesday.
With the Trumpflation euphoria easing back slightly overnight, leading to a modest paring in the USD index and US Treasury yields, Asian and European stocks rose, while US equity futures rebounded to just shy of new all time highs, as crude jumped on renewed optimism that OPEC will agree to cut output; metals rebounded from last week’s losses as yields dropped and the dollar halted its longest winning streak versus the euro.
For the 21 companies in the DJIA that reported non-GAAP EPS for Q3 2016, the average non-GAAP EPS growth rate was 10.8%. For these same 21 companies, the average GAAP EPS growth rate for Q3 2016 was down 3.7%.
Banxico hike rates by 50bps - meeting expectations - to 5.25% (the highest since 2009) in their first post-Trump statement. Warning that the Mexican economy "faces elevated uncertainty" hike for the fourth time, presumably in an effort to support the currency but fears that a more hawkish Fed will be more aggressive going forward sparked renewed selling in the Peso.