Spain's Black Swan In Muddied Waters As Court Ruling, Political Turmoil Threaten Catalan Secession BidSubmitted by Tyler Durden on 11/12/2015 11:41 -0500
Spain's Constitutional Court has ordered the suspension of Catalonia's independence bid and threatened to arrest its leader Artur Mas. Separately, Mas lost a bid for re-election as the same lawmakers who support his push for independence are unwilling to support him as President citing corruption.
"The ECB’s bond buying programme has created favourable financing conditions and provides member states with an incentive to defer much-needed budget consolidation and structural reforms. However, further structural reforms to strengthen markets and competitiveness are crucial for a self-sustaining economic recovery. In addition, monetary policy is leading to a build-up of risks to financial stability which could pave the way for a new financial crisis."
Today’s dilemma – for financial markets and central bankers – is that pushing back against nascent “risk off” unleashes another forceful bout of “risk on.” At this point, it’s either Bubble on or off – destabilizing either way. The global Bubble has grown too distended and the market backdrop too dysfunctional. Central bankers over the past 25 years have created excessive “money,” while incentivizing too much finance into financial speculation. There is now way too much “money” crowded into the securities and derivative markets, and the upshot is an increasingly hostile backdrop for leverage and speculation.
Empires, like adolescents, think they’ll live forever. In geopolitics, as in biology, expiration dates are never visible. When death comes, it’s always a shock. "At the beginning of the great unraveling, in 2015, I was still a young man. Like everyone else, I didn’t see this coming. Today, in 2050, fewer and fewer people can recall what it was like to live among those leviathans... Thirty-five years and endless catastrophes later on a poorer, bleaker, less hospitable planet, it’s clear that we just weren’t paying sufficient attention. Had we been listening, we would have heard the termites. There, in the basement of our common home, they were eating the very foundations out from under us. Suddenly, before we knew quite what was happening, all that was solid had melted into air."
Considering the crises facing Europe, the question is no longer: Will the EU survive? It is Orban’s question: Will European civilization survive the century? If the mass migrations are not halted, the rise of nationalist regimes at the expense of Europe’s liberals and leftists is inevitable.
There is little evidence currently that the rally over the last couple of months has done much to reverse the more "bearish" market signals that currently exist. Furthermore, as noted by Jochen Schmidt, the current market action may be more indicative of market topping process. Not unlike previous market topping action, the markets could indeed even register "new highs," as witnessed in both 2000 and 2007 before the major market correction begins. This is typically how "bull markets" end by providing false signals and sucking in the last of those willing to "buy the top." The devastation comes soon after.
Rajoy's warning: “Catalonia isn’t separating from anywhere."
- Fed speakers are likely to take focus in the US this week as market participants attempt to forecast the likelihood of a December FOMC rate lift off
- Eurozone GDP release is the most notable Eurozone data of the week, with a possible downbeat reading increasing the possibility of further easing by the ECB
- Global Stocks Slip Lower (WSJ)
- Dollar sits pretty, bond yields rise as Fed bets firm (Reuters)
- Takeover Loans Have Few Takers on Wall Street (WSJ)
- Chinese Buyers Seek Dollar Assets as Promise of Yuan Gains Fades (BBG)
- Banking Giants Learn Cost of Preventing Another Lehman Moment (BBG)
- Eurozone Finance Ministers Won’t Release $2.15 billion Loan to Greece (WSJ)
Once again, the two major macroeconomic announcements over the weekend came from China, where we first saw an unexpected, if still to be confirmed, increase in FX reserves, and then Chinese trade data once again disappointed tumbling by 6.9% while imports plunged 18.8%. So how did the market react? The Shanghai Composite Index rose for a fourth day and reached its highest since August 20because more bad data means more easing from the PBOC, and just to give what few investors are left the green light to come back into the pool, overnight Chinese brokers soared after Chinese IPOs returned after a 5 month hiatus. Elsewhere, Stocks and currencies in emerging markets slump on prospect of higher U.S. borrowing costs before year-end and after data underscored slowdown in Asia’s biggest economy. Euro strengthens.
In case you have been hibernating, the European Union (EU) is already in a complete state of disarray. Everywhere you look - economy, politics, security, society, demographics - there are very serious problems with no credible solution in sight. This does not bode well for the future of the EU, starting with those who will be living in it. The EU doesn't need any nationalists to destroy its future prospects. It’s doing absolutely fine on its own.
"The truth is, the debt ceiling doesn’t actually limit government spending. It’s a farce. Every time government debt gets close to the debt ceiling, Congress just raises it.”
This is the fifth time in the past three years that the VIX rose 2% of more on a day the S&P 500 also rose, and short-term volatility expectations were at least 10% below longer-term volatility expectations. Those dates were: September 14, 2012, January 21, 2014, August 25, 2014, and May 18, 2015. Over the next month, the S&P 500 was not able to gain more than +1% at its best point, and suffered a loss averaging -3.2% at its worst point. Quite a negative reward-to-risk ratio.
For those eager to cut to the chase and curious if overnight we have had another standard USDJPY ramp levitating US equity futures on low volume, the answer is yes. And since the USDJPY carry was patient enough, it managed to trigger the 2100 ES stops and as of this moment the futures were comfortably on the politically-correct side of 2100.