- U.S., backed by Arabs, launches first strikes on fighters in Syria (Reuters, BBG)
- But not all all back: Turkey Bars Kurds From Entering Syria to Fight Islamic State (BBG)
- Dollar Weakens on Airstrikes; Europe Stocks Drop (BBG)
- Ready for Rate Riot? Emerging Markets Set to Follow Fed (BBG)
- White House fence jumper had ammunition, machete in car, prosecutors say (WaPo)
- El-Erian "would have done things differently" (Reuters)
- Eurozone business growth slows in September, PMI survey finds (BBC)
- Shrinking Bond Desks Taken by Journeymen as Masters Fade (BBG)
- Manufacturing Rebound Relieves Growth Concerns in China (BBG)
- Former Trader Quits Playboy Club to Open Own Restaurant (BBG)
European stocks, U.S. equity index futures fall after Euro area PMI for Aug. missed ests., while bond yields for German, Spanish, U.K. debt fall. Copper rises with positive Chinese PMI data, while oil gains as OPEC discusses output cut. European health care stocks among largest underperformers as U.S. plans tighter rules on tax inversion M&A.
After the end of the cold war, the United States dominated world affairs for nearly twenty years. However, the situation of a unipolar world has changed since the financial crisis of 2008 to a now multipolar world that includes China, Russia, India, Brazil and South Africa. These powers are influencing and manipulating the conflict zones we have today to their advantage. By analysing and dissecting the issues concerning the major conflict zones on our world map, as well as illustrating the parties involved, this article will explain what political and strategic interests are at play and how the development in major hotspots shape the big picture. This will identify the geopolitical forces that affect the European continent and what future concerns and worries await us.
With the snoozer of an FOMC meeting in the rearview mirror, as well as Scotland's predetermined independence referndum, last week's key events: the BABA IPO and the iPhone 6 release, are now history, which means the near-term catalysts are gone and the coming week will be far more relaxed, if hardly boring. Here is what to expect.
While some were wondering if last night's sudden, commodity-liquidation driven selloff would last, most were not, expecting that the perfectly predictable levitation in the USDJPY around a round "tractor beam" number would provide a floor under the market .Sure enough, starting around midnight eastern, the USDJPY BTFDers emerged, oblivious to comments from former BOJ deputy governor Iwata who late last night said the obvious, and what we have been saying since January 2013, namely that a weak yen puts Japan at recession risk, and that a USDJPY in the 90-100 range reflects Japan fundamentals. And, as expected, the 109 level is where the algos have hone in today as a strange FX attractor, which also means that ES has reverse sharper overnight losses and was down just 7 points at last check even as the poundage in the commodity sector continues over rising fears of a sharp Chinese slowdown driven by its imploding housing sector (most recently observed here) without an offsetting stimulus program, following several comments by high-ranked Chinese individuals who poured cold water on any hopes of an imminent Chinese mega-QE or even modest rate cut.
Just one guy's attempt to make sense of what is likely to happen in the coming days.
- Scots spurn independence in historic vote but demand new powers (Reuters)
- Salmond’s Journey as Scotland’s Leader Ends Short of Destination (BBG)
- European Stocks Rally to 6 1/2-Year High on Scottish Vote (BBG)
- Jack Ma Planning Personal Roadshow With Clinton to Immelt (BBG)
- Some consumers say Apple is losing its 'cool' factor (Reuters)
- Gold IPhones at $3,600 as China Delay Fuels Black Market (BBG)
- This Man's Job: Make Bill Gates Richer (WSJ)
- Mom-and-Dad Banks Step Up Aid to First-Time Home Buyers (BBG)
- France says it launches first air strikes in Iraq (Reuters)
With the Fed unleashing its bubble-watchers last week, on the heels of warnings from the Central Bankers' Central Bank (BIS), The IMF has decided it is time to chirp in. As Mises' David Howden notes, after promoting QE for years (see here and here), the IMF is finally coming to realize what has been apparent for years now to almost everyone who doesn’t work for the Fed or the IMF: that low interest rates encourage risky decisions.The IMF warns, "financial market indicators suggested investor bets funded with borrowed money looked 'excessive' and that markets could quickly deflate if there were surprises in U.S. monetary policy or the conflicts in Ukraine and the Middle East."
- House votes to arm Syrian rebels (Reuters).... aka ISIS
- Fed Plots Cautious Course on Rate Rises (Hilsenrath)
- Scots vote in independence referendum to seal the United Kingdom's fate (Reuters)
- Yes or No, the Winner of the Referendum Is Brand Scotland (BBG)
- Draghi Loan Plan Missing Estimates Hampers ECB Stimulus (BBG) - get with the spin, it simply means "Moar QE"
- Obama Plans to Tightly Control Strikes on Syria (WSJ)
- IMF warns of risks from 'excessive' financial market bets (Reuters)
- Russia Praises Ukraine's Autonomy Law for Rebel Areas (WSJ)
An interesting week for the evolution of Forex!
“It’s a questionably unquestionable situation... Are the markets prepared for a shocking answer... Will Janet Yellen announce the final end to QE? Or electrify the bulls with more accommodation? Can Yellen’s eloquent elocution energize the markets…or will she magnetize the bears? Tune in next time Fed fans... Same Fed time... Same Fed channel”
The financial media has no concern of negative outcomes, Wall Street has growth priced in that has never occurred in history, and there is NO expectation of a recession built into any forward assumptions. We have indeed discovered financial “Utopia,” or at least that is what is currently believe.
- Thank you market Chief Risk Officer Bernanke/Yellen: Calpers to Exit Hedge Funds, Divest $4 Billion Stake (BBG)
- World stocks hit one-month low, caution ahead of Fed (Reuters)
- U.S. Efforts to Build Coalition Against Islamic State in Iraq, Syria Are Hampered by Sectarian Divide (WSJ)
- Time to throw away some more good money: Sears Borrows $400 Million From Lampert’s ESL Investments (BBG)
- Wildfires rage in California drought, hundreds forced to flee (Reuters)
- United Offers $100,000 Buyouts to Flight Attendants (BBG)
- Biggest Banks Said to Overhaul FX Trading After Scandals (BBG)
- You mean you have to pay? Administration threatens to cut off ObamaCare subsidies to 360,000 (The Hill)
- RBS Said to Dismiss Most of Team Overseeing Central Europe Debt (BBG) they will be hired by the ECB
As always, the bottom line is about leverage and bargaining power. It is here that, miraculously, things once again devolve back to, drumroll, oil, and the fact that an independent Scotland would keep 90% of the oil revenues! As we showed several days ago, Scotland's oil may be the single biggest wildcard in the entire Independence movement. It is this oil that as SocGen's Albert Edwards shows earlier this morning, is what gives Scotland all the leverage.
The S&P’s rally has been sustained through near-zero-cost money used to: (1) buy back stock to enrich insiders and please activist hedge funds which have borrowed big to buy big; and (2) prop up the overall market because investors have learned that buying on margin when the costs are minimal - and below dividend yields - just keeps paying off. Stein’s law says, “If something cannot go on forever, it will stop.” Too bad it doesn’t say when. Gold loses its luster when: (1) inflation seems to be as remote as a pot of gold at the end of the rainbow; and (2) even a concatenation of crises fails to send investors rushing into the time-tested crisis consoler. We see geopolitical risks expanding from here - not contracting - and stick to our investment advice that the broad stock market is precariously valued. A range of options is available for those who wish to hedge themselves against even worse news. Gold is part of any such risk mitigation. So are long government bonds. Most importantly, we have entered an era when wise investors will devote as much time to reading the foreign news as they allocate to reading the investment section.