US equity markets are quietly doing what they do - go up and stay up. But in the biggest markets in the world - US Treasury, Japanese bonds, and foreign exchange - something turmoily is happening. Yields are cratering today.. The USDollar is getting hammered on the back of JPY gapping dramatically stronger and EUR surging.
What's an equity investor to do these days?
So far it has been an overnight session which clearly forgot to take its lithium, with futures first tumbling after CNBC's "leak" that a Greek deal had been reached was refuted, only to surge subsequently on both the Riskbank's foray into NIRP and QE which crushed the Swedish currency and sent its stocks to recorder highs, and more importantly, on the latest ceasefire out of Minsk which has pushed Russian and European assets substantially higher. While only the most naive believe that any palpable end to Ukraine hostilities will emerge as a result of today's delay, expect for Greek headlines to return with a vengeance as today it is Tsipras' turn to speak at a summit of the 28 European Union leaders set to begin momentarily.
The only question on traders' minds today, with the lack of any macro news out of the US (except for the DOE crude oil inventory update at 10:30am Eastern expecting a build of 3.5MM, down from 6.33MM last week, and the 10 Year bond auction at 1pm) is which Greek trip abroad is more important: that of FinMin Varoufakis to Belgium where he will enter the lion's den of Eurogroup finance ministers at 3:30pm GMT, or that of the foreign minister Kotzias who has already arrived in Moscow, and where we already got such blockbuster statements as:
LAVROV: RUSSIA WILL CONSIDER AID REQUESTS, IF GREECE MAKES THEM; KOTZIAS: GREECE IS WILLING TO MEDIATE BETWEEN EU, RUSSIA
Or perhaps both are critical, as what happens in Brussels will surely impact the outcome of the Greek trip to Russia?
So far it has been largely a repeat of the previous overnight session, where absent significant macro drivers, the attention again remains focused both on China, which reported some truly ugly inflation (with 0.8% Y/Y CPI the lowest since Lehman, just call it deflation net of the "goalseeking") data (which as usually is "good for stocks" pushing the SHCOMP 1.5% higher as it means even more easing), and on Greece, which has not made any major headlines in the past 24 hours as patience on both sides is growing thin ahead of the final "bluff" showdown between Greece and the Eurozone is imminent. The question as usual is who will have just a fraction more leverage in the final assessment - Greece has made its ask known, and it comes in the form of 10 billion euros in short-term "bridge" financing consisting of €8 billion increase in Bills issuance and €1.9 billion in ECB profits, as it tries to stave off a funding crunch, a proposal which will be presented on the Wednesday meeting of euro area finance ministers in Brussels. The question remains what Europe's countrbid, if any, will be. For the answer: stay tuned in 24 hours.
"Enjoy the party, but dance near the door."
How to trade through the Greek crisis negotiations and the post-crisis world? This flow chart explains it.
Albert Edwards' On The Next Shoe To Drop: The Realization That Core Inflation In The US And Europe Are The SameSubmitted by Tyler Durden on 02/08/2015 21:14 -0400
"The next shoe to drop will be the realisation that the US recovery is stalling and outright deflation is as big a threat there as it is in the eurozone. Indeed my former esteemed colleagues Marchel Alexandrovich and David Owen pointed out to me that if US core CPI is measured in a similar way to the eurozone (i.e. ex shelter), then US core CPI inflation is already pari passu with the eurozone ? despite the former having enjoyed a much stronger economy!"
As the jobs' "good news" sinks in and the realization that this is "bad news" for free-money-a-holics hits, US equity markets have stumbled off the exuberant knee-jerk highs and given up the jobs bounce (for now)... as they are reminded that GREXIT is a real risk and oil's price collapse has yet to play out in the real economy...
It has been a quiet overnight session, following yesterday's epic short-squeeze driven - the biggest since 2011 - breakout in the S&P500 back to green for the year, with European trading particularly subdued as the final session of the week awaits US nonfarm payroll data, expected at 230K, Goldman cutting its estimate from 250K to 210K three days ago, and with January NFPs having a particular tendency to disappoint Wall Street estimates on 9 of the past 10. Furthermore, none of those prior 10 occasions had a massive oil-patch CapEx crunch and mass termination event: something which even the BLS will have to notice eventually. But more than the NFP number of the meaningless unemployment rate (as some 93 million Americans languish outside of the labor force), everyone will be watching the average hourly earnings, which last month tumbled -0.2% and are expected to rebound 0.3% in January.
"Central bank polices have ruptured the proper functioning of capital markets. Some investors myopically believe that 'money printing needs a home' and that it will end up in equities (the asset class with upside). However, such a belief needs to include a deep faith in the central bank’s abilities to navigate a soft landing. History is not on their side. Investors pouring into equities might be playing an epic game of chicken."
Market Wrap: Equity Futures Subdued On Oil, Energy Profit Taking Following Latest Crude Inventory SurgeSubmitted by Tyler Durden on 02/04/2015 07:54 -0400
Following the torrid surge in crude in the past 4 days, overnight oil price have taken a step back - if only until the "newer normal" 2:30pm ramp into the Nymex close - with both Brent and WTI down nearly 3%, with yesterday's latest API inventory data showing another massive crude build when it was released after the close, which in turn is pressuing futures modestly if decidedly, and not even the surprise PBOC RRR-cut (which many had seen as likely if only in advance of the liquidity sapping Chinese New Year) which hit the tape an hour ago managed to push ES into the green, at least for now. Curiously, not even the now standard low volume levitation in the USDJPY in recent trading has had any impact on US futures, which appear to have found a new correlation regime for the time being, one which tracks what oil does more than any other asset class.