The Fed has ended QE. And it won’t be launching a new program anytime soon. So when this rally ends and stocks collapse, the Fed won’t be coming to the rescue.
To summarize (even though with liquidity as non-existant as it is, this may be completely stale by the time we go to print in a minute or so), European shares erase gains, fall close to intraday lows following the Fed’s decision to end QE. Banks, basic resources sectors underperform, while health care, tech outperform. Companies including Shell, Barclays, Aviva, Volkswagen, Alcatel-Lucent, ASMI, Bayer released earnings. German unemployment unexpectedly declines. The Italian and U.K. markets are the worst-performing larger bourses, the Swiss the best. The euro is weaker against the dollar. Greek 10yr bond yields rise; German yields decline. Commodities decline, with nickel, silver underperforming and wheat outperforming. U.S. jobless claims, GDP, personal consumption, core PCE due later.
QE destroys societies, economies and financial systems, it doesn’t heal them. So maybe it’s a touch of genius that the great powers of global finance have first pushed Keynes into the academic world and then academics like Bernanke and Yellen into positions such as head of the Fed, making everyone blind to the fact that what they think is beneficial, including many who think they’re real smart, actually hurts them most. This whole thing is so broken and perverted it’s getting hard to understand why anybody would want to continue clinging on to it. But then, what does anybody know? 95%+ of people have been reduced to pawns in someone else’s game, and they have no idea whatsoever.
Whether it is European banks (Greece and Italy) plunging again, lower-than-expected crude inventories, or expectations of an uber dovish Fed this afternoon, the US Dollar has suddenly gone bidless against the major currencies.
The Swiss establishment has been reliant upon the public’s ignorance, but now they are up against a formidable opponent in Egon von Greyerz. Not only that, but they can clearly see that, as elsewhere around the world, the public is fast becoming disenchanted with the status quo; and that is potentially very dangerous for these people. What is important to understand here is that if the initiative passes it will be part of the Swiss constitution IMMEDIATELY - as some are suggesting. This means that the government and parliament cannot touch it. Only another referendum can change it. This is proper democracy for you. The closer we get to the vote on November 30, the bigger this story is going to become, and the bigger it becomes, the higher the chance that the yes vote wins. Should that happen, it will undoubtedly set off alarm bells throughout the gold market, as yet more physical gold will need to be repatriated and another sizeable, price-insensitive buyer will enter the marketplace.
If yesterday's markets closed broadly unchanged following all the excitement from the latest "buy the rumor, sell the news" European stress test coupled with a quadruple whammy of macroeconomic misses across the globe, then today's overnight trading session has been far more muted with no major reports, and if the highlight was Kuroda's broken, and erroneous, record then the catalyst that pushed the Nikkei lower by 0.4% was a Bloomberg article this morning mentioning that lower oil prices could mean the BoJ is forced to "tone down or abandon its outlook for inflation." This comes before the Bank of Japan meeting on Friday where the focus will likely be on whether Kuroda says he is fully committed to keeping current monetary policy open ended and whether or not he outlines a target for the BoJ’s asset balance by the end of 2015; some such as Morgan Stanely even believe the BOJ may announce an expansion of its QE program even if most don't, considering the soaring import cost inflation that is ravaging the nation and is pushing Abe's rating dangerously low. Ironically it was the USDJPY levitation after the Japanese session, which launched just as Europe opened, moving the USDJPY from 107.80 to 108.10, that has managed to push equity futures up 0.5% on the usual: nothing.
ECB Stress Test Fails To Inspire Confidence Again As Euro Stocks Slide After Early Rally; Monte Paschi CrashesSubmitted by Tyler Durden on 10/27/2014 07:09 -0400
It started off so well: the day after the ECB said that despite a gargantuan €879 billion in bad loans, of which €136 billion were previously undisclosed, only 25 European banks had failed its stress test and had to raised capital, 17 of which had already remedied their capital deficiency confirming that absolutely nothing would change, Europe started off with a bang as stocks across the Atlantic jumped, which in turn pushed US equity futures to fresh multi-week highs putting the early October market drubbing well into the rear view mirror. Then things turned sour. Whether as a result of the re-election of incumbent Brazilian president Dilma Russeff, which is expected to lead to a greater than 10% plunge in the Bovespa when it opens later, or the latest disappointment out of Germany, when the October IFO confidence declined again from 104.5 to 103.2, or because "failing" Italian bank Monte Paschi was not only repeatedly halted after crashing 20% but which saw yet another "transitory" short-selling ban by the Italian regulator, and the mood in Europe suddenly turned quite sour, which in turn dragged both the EURUSD and the USDJPY lower, and with it US equity futures which at last check were red.
One can't make this up: "The scenario of deflation is not there because indeed we don't consider that deflation is going to happen." - Vítor Constâncio, Vice-President of the ECB
Europe is fast turning into a freak comedy show. Very fast. Or maybe we should say it’s always been one, and it’s just that the Larry, Curly and Moe moves are only now coming out in droves. Or maybe, what do I know, we’re just starting to understand how much talent for farce and slapstick the boys from Brussels have always had. Someone finish off that inane union before it starts to do real serious harm. Because it will.
"Ebola seems like a lame excuse, frankly, but it’s a widespread one. Assuming that everyone in the market has above-average intelligence we don’t think they’ll trade Ebola headlines" - CRT's David Ader
Gold has been in a bear market for three years. Technical analysts are asking themselves whether they should call an end to this slump on the basis of the "triple-bottom" recently made at $1180/oz, or if they should be wary of a coming downside break beneath that level. The purpose of this article is to look at the drivers of the gold price and explain why today's market value is badly reflective of gold's true worth.
130 banks are being tested. 12-18 will fail. And on top of that, almost a third of 130, that’s over 40, will pass while still getting their feet wet. That means anywhere between 40% and 44% of Eurozone banks either fail or are in bad shape. If 40% of your banks are either dead in the water or barely floating, I’d say you have a major problem. We all know our world, be it politics or economics, consists almost exclusively of spin these days, but in the face of these numbers we very much wonder how many people will be willing to bet their own money that Europe can get away with another round of moonsmoke and roses come Monday.
With its latest "coverage" of the European economy, the Economist may have finally jumped the parrot.
From Tepper's "Short The Euro," call (which he hopes does better than his "bond bull is over" call) to Icahn's "HY credit is in a bubble... and I am short" warning, The 2-day Robin Hood conference in NYC had something for everyone. Paul Tudor Jones thinks US equities will outperform the rest of the world this year but "the piper will be paid one day," and Larry Fink says "equities are health" after last week's correction... and Whitney Tilson is short Lumber Liquidators (trade accordingly).
Who are they trying to fool? (again)