As expected by most, the ECB just announced its three key interest rates unchanged, meaning the surge in the trade- weighted EUR will continue to weigh on European exports.
It has been another quiet overnight session, with macro data decidedly mixed and "adjusted", because while the key German December Industrial Production number came in sequentially at 0.3% on expectations of a 0.2% rise, it fell more than expected on an unadjusted Y/Y basis, dropping 1.1%, on expectations of just a 0.5% drop. On the other hand, Spain's industrial output not unexpectedly stagnated for a 16th consecutive month, plunging by 6.9% in December in line with expectations, and sliding by a whopping 8.5% Y/Y. In bond auction news, Spain sold some €4.61 billion in 2015, 2018 and 2029 bonds, all pricing with yields substantially higher than recent January auctions, which in turn sent the Spanish 10 Year to 2 month highs of 5.52% after the auction, however it has since regained most of the losses.
There have been several articles as of late discussing that the next great secular bull market has arrived. However, the reality is that this cycle is currently unlike anything that we have potentially witnessed in the past. With massive central bank interventions, artificially suppressed interest rates, sub-par economic growth, high unemployment and elevated stock market prices it is likely that the current secular bear market may be longer than the historical average. No matter how you slice the data - the simple fact is that we are still years away from the end of the current secular bear market. The mistake that analysts, economists and the media continue to make is that the current ebbs and flows of the economy are part of a natural, and organic, economic cycle. If this was the case then there would be no need for continued injections of liquidity into the system in an ongoing attempt to artificially suppress interest rates, boost housing or inflate asset markets. From market-to-GDP ratios, cyclical P/Es, misconstrued earnings yields, and the analogs to previous Fed-blow bubbles, we appear near levels more consistent with cyclical bull market peaks rather than where secular bear markets have ended.
Citi's Willem Buiter sums it all up: "...the improvement in sentiment appears to have long overshot its fundamental basis and was driven in part by unrealistic policy and growth expectations, an abundance of liquidity and an increasingly frantic search for yield. The key word in the recovery globally, and in particular in Europe, growth is fragile. To us the key word about the post summer 2012 Euro Area (EA) asset boom is that most of it is a bubble, and one which will burst at a time of its own choosing, even though we concede that ample liquidity can often keep bubbles afloat for a long time." His conclusion is self-evident, "markets materially underestimate these risks," as the EA sovereign debt and banking crisis is far from over. If anything, recent developments, notably policy complacency bred by market complacency, combined with higher political risks in a number of EA countries highlight the risks of sovereign debt restructuring and bank debt restructuring in the EA down the line.
Beggar-Thy-Neighbor Currency Devaluations Proved Ruinous For The Global Economy In The 1930s ... Here We Go Again!Submitted by George Washington on 02/06/2013 14:20 -0400
The Global Currency War Is Escalating
Due to job destruction in the private sector that is gasping for air.
Perhaps the biggest news of the night was the resurgence of Silvio Berlusconi, who managed to close the lead to the Democratic Party leader Bersani, embroiled in the fallout from the Monte Paschi scandal, to just 3.7 points, or within the 4 point margin of error, before the February 25th elections. According to a SkyTG24 poll, support for Bersani’s bloc dropped 0.2 point to 33.1% from yesterday while support for Berlusconi’s bloc rose 0.1 point to 29.4%. This is certainly the most catalytically destabilizing event on the horizon for Italy, and Europe, as should Silvio win the Italian elections, an outcome unthinkable as recently as a month ago, all bets about Europe's technocratic/Goldman-forced "recovery" in which only the banks are recovering, if not the people, are off.
Press conference from hell, slugfest about corruption, even in Germany
- Obama to meet with Goldman's Blankfein, other CEOs Tuesday (Reuters)
- Chinese Firms Shrug at Rising Debt (WSJ)
- McGraw-Hill, S&P Sued by U.S. Over Mortgage-Bond Ratings (BBG)... but not Moody's or Fitch
- Dime a Dozen: Dollar Stores Pinched by Rapid Expansion (WSJ)
- Dell Board Said to Vote Monday Night on $24 Billion LBO (BBG)
- BOJ Governor Shirakawa to step down on March 19 (Reuters)
- Alberta may offer more to smooth way for Keystone (Reuters)
- Facebook Is Said to Create Mobile Location-Tracking App (BBG)
- Barclays takes another $1.6 billion hit for mis-selling (Reuters)
- Apple App Advantage Eroded as Google Narrows IPhone Lead (BBG)
- Texas School-Finance System Unconstitutional, Judge Rules (BBG)
- World Risks ‘Perfect Storm’ on Capital Flows, Carstens Says (BBG)
Just when one thought the old overnight futures levitation on a surging EURUSD regime was over, and was replaced by some semblance of normalcy, here comes Europe, sending the EURUSD screeching higher by some 100 pips from a support threatening 1.3460 on no news, with absolutely nothing changed, and pushing US futures to virtually unchanged from yesterday morning wiping out the entire day's losses in 3 short hours of near-zero volume overnight trading.
Our favorite Super EURO Heroes have returned!
Gold bullion for delivery in December climbed as high as 1.2% to 5,000 yen per gram on the TOCOM. In ounce terms, the yen fell to 155,180/oz against gold, its highest level since 1980. According to the data on Bloomberg, the all-time record high for gold priced in yen was 204,850 yen on January 21, 1980. Thus, yen gold remains 33% below the record intraday nominal high from 1980. Given the Japanese determination to devalue the yen to escape deflation, the record nominal high will almost certainly be reached in the coming months. Platinum also climbed 2.7% to 5,130 yen per gram for the same month, the highest level for the most-active contract since May of 2010.
Deutsche Bank co-CEO: “In this uncertain world, I cannot exclude anything."
There are no limits on Central State and financial Aristocracy exploitation, but there are limits on what debt-serfs can pay. Since we can't print money, there are limits for us debt-serfs. There are also limits on how much we can extract from a neocolonial/neofeudal system as wages. This neocolonial/neofeudal financialization model will implode under its own weight, and that will be the crisis.
After two consecutive down days in the market, it was time to get real, and like clockwork the dollar and yen devastation started right out of the gate in overnight trading, when first the USDJPY exploded higher, followed promptly by the EURUSD, both of which hit new period highs, of over 92, and just why of 1.37 respectively. And with not one funding currency around to push risk higher, but two, futures have ramped enough to undo all of yesterday's losses and then some. Bad news was either promptly ignored, such as China's official PMI coming in at 50.4, below expectations of the 50.6 print, or offset by conflicting data, with the HSBC China PMI print moments after at 52.3, higher than the 52.0 expected, taking us back to early 2012 when the Chinese PMI was contracting and expending at the same time.