This is how DB summarizes what has been the primary feature of capital markets this week - the huge move in European bond yields: "On April 17th, 10-year Bunds traded below 0.05% intra-day. Two and a half weeks later and yesterday saw bunds close around 1000% higher than those yield lows at 0.516% after rising +6.2bps on the day." Right out of the European open today, the government bond selloff accelerated with the 10Y Bund reaching as wide as 0.595% with the periphery following closely behind when at 9:30am CET sharp, just as the selloff seemed to be getting out of control, it reversed and out of nowhere and a furious buying wave pushed the Bund and most peripheral bonds unchanged or tighter on the day! Strange, to say the least. Also, illiquid.
If yesterday's laughable lack of volume (helped by the closure of Japan and the UK) coupled with hopes that the end of the buyback blackout period was enough to send stocks surging if only to end with a whimper below all time highs despite what is now looking like three consecutive quarters of Y/Y EPS declines according to Factset, today's ramp will be more difficult for the NY Fed and Citadel to engineer, not least of all due to the headwind of the overnight "incident" by China's stock bubble which saw the Shanghai Composite tumble by 4%, the most since January.
Futures Levitate Following Worst Chinese Mfg PMI In One Year, Brent At 2015 Highs; Bund Slide ContinuesSubmitted by Tyler Durden on 05/04/2015 06:45 -0400
The best news for stocks is twofold: volumes continue to be lethargic with both the UK (May Day bank holiday) and Japan closed until Thursday (Golden Week), while the bulk of the S&P500 has now exited the stock buyback quiet period. As such, ignore record equity outflows - all the matters is that corporate CFOs, flush with brand news bond issuance cash, will tell their favorite Wall Street trading desk to buy stocks at just the right inflection point sending the market surging just as shorts once again test the downtrend and the 50 DMA.
Peering into the froth of a cappuccino, we noticed various sized bubbles. There is a fine line between froth and bubbles. As we continued our gaze, both eventually disappeared. Stirring made the frothy bubbles disappear more quickly. Markets are beginning to stir (more later). Unsustainable states ultimately end.
In reviewing the financials of one of the largest shale producers in the United States, Whiting Petroleum, we can’t help but notice the parallels to the .COM era of 1999 which, to some extent, has already returned to the technology and biotech sectors of today.
The news of Navinder Sarao's arrest, the scapegoat for all that is broken with the world's equity markets, may have come, gone and be largely forgotten, but while the CFTC is happy to have washed the corruption and incompetence off its hands by destroying the career of one insignificant trader (whatever happens, redirect public attention from the HFT firm that just came public and boasted of one trading loss day in 6 years) Sarao is facing decades in prison. And, what is worse for the alleged mastermind of the May 2010 flash crash, he won't even be able to enjoy a few weeks in quasi-freedom. Why? Because this lonely 36 year old, who "crashed" the entire market 5 years ago from his parents' basement (literally), can't even afford bail.
US equity markets have v-shape-recovered this morning after plunging on a combination of good housing data (that's bad news), weak manufacturing data and dismal consumer confidence which then was accelerated as Iran headlines smashed oil higher. All that was quickly forgiven and stocks have soared... Small Caps are now 1.5% as 'investors' panic-buy back to the highs of the day... VIX was monkey-hammered from 14.25 to back under 13.
The worldwide commodity glut is not a surprise to Austrian school economists - It is a wonderful example of the adverse consequences of monetary repression to drive the interest rate below the natural rate.
This new nothingness is creating a youth, a political system and an economic outlook which is based more in peoples’ heads and minds than it is in reality.
At a certain point, even central bankers will realise they can go no further.
Amid too close scrutiny in the equity markets, it appears the "spoofing" machines have turned their attention to the Soybean complex. As Nanex's Eric Hunsader exposes, a series of 200-lot sell-order-spoofs has sparked a pump-and-dump roundtrip in Soybean futures today. Oat futures have been monkey-hammered down almost 10% today and ripped back higher.
"The global economy is awash as never before in commodities like oil, cotton and iron ore, but also with capital and labor—a glut that presents several challenges as policy makers struggle to stoke demand," WSJ notes, suggesting yet again that QE can cause deflation when those who have access to easy money overproduce but do not witness a comparable increase in demand from those to whom the direct benefits of ultra accommodative policies do not immediately accrue.
Futures Fizzle After Greece "Hammered" In Riga, Varoufakis Accused Of Being "A Time-Waster, Gambler, Amateur"Submitted by Tyler Durden on 04/24/2015 06:59 -0400
Even though no rational person expected that the Greek situation would be resolved at today's talks in Riga, Latvia, apparently the algos were so caught up in spoofing each other to new record highs that futures, after surging once more overnight following the latest Google miss which sent the company and the Nasdaq soaring, actually dipped modestly into the red following headlines that the latest Greek talks have broken down after a "hostile" Troika "hammered" the Greek finmin, who was accused by European finmins of "being a time-waster, a gambler and an amateur."
- Clinton charities will refile tax returns, audit for other errors (Reuters)
- China Warns North Korean Nuclear Threat Is Rising (WSJ), or another country realizes war is the only "exit"
- Shares, euro sag after euro zone PMIs disappoint (Reuters)
- China Manufacturing Gauge Drops to Lowest Level in 12 Months (BBG)
- Deutsche Bank Said to Pay $2.14 Billion in Libor Case (BBG), or roughly a €20,000 per banker "get out of jail" fee
- Brazil’s Petrobras Reports Nearly $17 Billion in Asset and Corruption Charges (WSJ)
- Can This Oil Baron’s Company Withstand Another Quake? (BBG)
- Bad for Q1 GDP: Raytheon sales fall amid weak U.S. defense spending (Reuters)
Today is shaping up to be a rerun of yesterday where another frenzied Asian session that has seen both the Shanghai Composite and the Nikkei close higher yet again (following the weakest Chinese HSBC mfg PMI in one year which in an upside down world means more easing and thus higher stocks) has for now led to lower US equity futures with the driver, at least in the early session, being a statement by the BOJ's Kuroda that there’s a "possibility" the Bank of Japan’s 2% inflation target will be delayed and may occur in April 2016.