Eurozone

Nikkei 14,000 Holds, Shanghai 2,000 Holds, But USDJPY 101 Breaks Bad

Another right of perfectly round number supports: while the Shanghai Composite once again dipped below 2000 overnight to as low as 1991 only to close modestly higher, and the Nikkei followed suit, also sliding below the psychological support level of 14,000 to an intraday low of 13,964 only to close just above 14,000 if in the red, it was the USDJPY that has suffered the most technical pain when shortly after 2:30 am eastern time, the USDJPY dropped by nearly 40 pips, hours after the BOJ indicated that not only is it happy with where in the QE process it stands, but hinted there may well be no more QE, and certainly nothing imminent . In the process, the USDJPY fully smashed the 200 DMA, with the next key parallel support being the 200DMA in the EURJPY at 138.08 (which was at 138.34 last). When that too gives way, it is a straight line to double digits in the USDJPY, and the countdown to the end of the Abe regime begins in earnest.

Vast Majority Of Swiss Reject $25 Minimum Wage In National Referendum

Six months ago, it was this same Switzerland that, contrary to the prerogatives of the pervasive "fairness doctrine" taking the new socialist world by storm, rejected imposing limits on executive pay. Then mere hours ago, in a move that would give president Obama wealth redistribution nightmares for months, a whopping 77% of Swiss voters rejected an initiative for a national minimum wage of 22 francs, or just under $25, per hour, according to projection by Swiss television SRF. And confirming that when it comes to anti-socialism, Switzerland may well be the last bastion, not a single canton supported the measure.

Frontrunning: May 16

  • Bank of England sees 'no housing bubble' (Independent)
  • ‘If the euro falls, Europe falls’ (FT)
  • India's pro-business Modi storms to historic election win (Reuters)
  • Global Growth Worries Climb (WSJ)
  • Bitcoin Foundation hit by resignations over new director (Reuters)
  • Blackstone Goes All In After the Flop (WSJ)
  • SAC's Steinberg loses bid for insider trading acquittal (Reuters)
  • Beats Satan: Republicans Paint Reid as Bogeyman in 2014 Senate Races (BBG)
  • Tech Firms, Small Startups Object to Paying for Internet 'Fast Lanes' (WSJ) - but they just provide liquidity
  • U.S. Warns Russia of Sanctions as Ukraine Troops Advance (BBG)
  • Major U.S. hedge funds sold 'momentum' Internet names in first-quarter (Reuters)

When The Head Of The European Central Bank Lies To Zero Hedge On The Record: Presenting Europe's "Plan Z"

We are happy to report that Zero Hedge is the first media outlet that Mario Draghi has very publicly, officially, and on the record, lied to. Because as we learned overnight, Europe most certainly had a "plan in place so that the markets don't basically collapse." Only it wasn't as Margio Draghi called it, Plan B. It was a different letter of the alphabet. Thanks to the FT's Peter Spiegel we now know that just over a year ago, in order to preserve the myth that Europe's power echelons are so "confident" with the Eurozone staying together they did not even consider a break up as a potential outcome, Draghi explicitly and on the record lied.

Presenting Europe's Plan Z.

Surge In Japan's Economy Pushes Futures Lower, But European GDP Miss Welcomed By Stocks

In this brave new centrally-planned world, where bad is good, very bad is very good, and everything is weather adjusted, Japan's blistering GDP report last night, printing at 5.9% on expectations of 4.3% was "bad" because it means less possibility for a boost in QE pushing futures lower, while the liquidity addicts were giddy with the GDP miss in Europe where everyone except Germany missed (as for the German beat, Goldman's crack theam of economic climatologists, said it was due to the weather), and the Eurozone as a whole came at 0.2%, half the forecast 0.4%, which in turn allowed futures to regain some of the lost ground.

Why The Bond Bubble In Peripheral Europe Is A Problem

Headlines were made earlier today as Ireland’s ten year borrowing costs dropped below the UK’s for the first time in six years. Given that it only recently exited a bailout programme and not long ago was mired in the worst crisis in a generation, this is a pretty astonishing turnaround. Nor is Ireland alone. Spain and Italy can now borrow at similar rates to the USA on ten year debt. More broadly, in the past year peripheral countries borrowing costs have plummeted to levels seen before the crisis, or below, as countries begin exiting bailouts and returning to the markets. There are three key factors driving this 'bubble" and five major problems stemming from this seeming nirvana.

Goldman Says European QE Will Come In 2015 At The Earliest, If At All

  • Goldman’s Andrew Wilson Says QE in Europe a 2015 Story If at All
  • European economy would have to weaken significantly before QE comes into play, said Andrew Wilson, co-head of Global Fixed Income and Liquidy management team at Goldman Sachs Asset Management.
  • Says Draghi has foreshadowed policy easing at next meeting, expects ECB to cut rates 1-2 times before they look to other methods such as an LTRO
  • Says if other methods don’t work it would “ultimately have to be QE”

Janjuah-pdate On The S&P 500: First 1950, Then 1700

"Notwithstanding the view that we may see S&P get up to 1950 (+/- a little) over the next fortnight or so, over the rest of Q2 and Q3 we could see a decent correction of up to 20% in the risk-on trade. Low 1700s in the S&P attracts, and thereafter, depending on weekly closes, low 1600s/mid-1500s S&P could be in play. For now, however, the key level to the upside is 2000 as a weekly close on the S&P – if achieved then I would have to revisit my bearish bias for the belly of 2014. To the downside a weekly close below 1770 would, I feel, easily put a 1700 S&P within reach. Beyond that I would need to assess data and price action at the time before highlighting the next set of levels, but I would not be surprised to see policymakers again attempt to boost markets later this year - there should be no surprise if this happens because the reaction function of central bankers has become depressingly predictable."

Angela Merkel On The Ledge: "This Is Not Fair... I Am Not Going To Commit Suicide"

... To the astonishment of almost everyone in the room, Angela Merkel began to cry.  “Das ist nicht fair.” That is not fair, the German chancellor said angrily, tears welling in her eyes. “Ich bringe mich nicht selbst um.” I am not going to commit suicide. For those who witnessed the breakdown in a small conference room in the French seaside resort of Cannes, it was shocking enough to watch Europe’s most powerful and emotionally controlled leader brought to tears....

Saxobank Warns China Is Exporting Deflation (And It's Not Going To Stop Anytime Soon)

With global growth expectations for 2014 having just collapsed to new lows, and on the heels of mixed inflation data last night in China (and stubbornly low-flation in Europe), Saxobank's Steen Jakobsen explains in this brief clip how, thanks to massive over-building and now over-capacity, China is in fact exporting its deflation to the rest of the world - most problematically Europe. What is more worrying for all the optimists, Jakobsen argues that both the Eurozone and China are at the centre of a slowing world economy which will see stagnation for the immediate future and ECB action, or lack of it, can't do a thing to change the status quo.

Two More Theories To Explain The "Treasury Bond Buying" Mystery

With everyone and their mom confused at how bonds can rally when stocks (the ultimate arbiter of truthiness) are also positive, we have seen Deutsche confused (temporary technicals), Bloomberg confirm the shortage, and BofA blame the weather (for a lack of bond selling). Today, we have two more thoughtful and comprehensive perspectives from Gavekal's Louis-Vincent Gave (on why yields are so low) and Scotiabank's Guy Haselmann (on why they' stay that way).

How Bank Of America Explains The Treasury Bid: "Cold Weather"

Bank of America, whose stubborn, and quite abysmal "short Treasurys" call, has been one of the worst sellside trade recos in recent history and cost investors countless losses, has an update. Only instead of doing a mea culpa and finally admitting it was wrong, the bailed out bank has decided to provide humor instead. Namely it too has joined the ranks of countless others providing an "explanation" (or in its case, an "excuse") for the relentless bond bid. The punchline: "cold weather."

Frontrunning: May 6

  • Both sides bury dead as Ukraine slides towards war (Reuters)
  • Dollar wilts to 6 1/2-month low; shares drift (Reuters)
  • Draghi Grapples With Money Markets Signaling Recovery Too Early (BBG)
  • Foreign wristslaps: Credit Suisse Nears Record Tax Plea: Credit Suisse Settlement Expected to Exceed $1 Billion (WSJ)
  • OECD joins IMF in cutting global growth forecast, demanding moar QE from ECB  (WSJ)
  • Three Bankers Bolster Blankfein as Goldman Trading Sinks (BBG)
  • Strong performance from eurozone services sector (FT)
  • OECD Cuts Forecast for 2014 Global Growth; Urges ECB Action (WSJ)
  • Elite Colleges Don't Buy Happiness for Graduates (WSJ)
  • How Russia Inc. Moves Billions Offshore -- and a Handful of Tax Havens May Hold Key to Sanctions (BBG)