With China celebrating the Lunar New Year and offline until next weekend, and with the US in the usual post-payrolls macro newsflow lull, the markets will have more than enough time to stew in the latest source of contagion fears, namely Europe, the same Europe which until recently was fixed but is broken all over again.
There is a new element to the latest European selloff, one which turned vicious just minutes after Europe opened for trading this morning with not just commercial banks (who are now all subject to bail-ins courtesy of the BRRD) being dumped with the Deutsche Bank water, but peripheral spreads and equity markets have all joined in. And moments ago, the Athens stock market just dropped to the lowest level since 1990, while the Greek banking index just crashed over 21% to a new all time low.
Everything went from bad to worse once Europe opened, and things started going "bump in the morning" across the European banking sector, where not only has it been more of the same with CDS spreads for major banks - most notably Deutsche Bank - continuing their surge wider, but also EM spreads to Bunds all following, with the Portugal-Germany Yield spread blowing out above 300 bps for the first time since 2014, and other peripheral nations following.
A multi-decade Credit Bubble is coming to an end. The past seven years has amounted to an incredible blow-off top and the ongoing worldwide collapse in financial stocks provides powerful support for the bursting global Bubble thesis. Few are yet willing to accept the harsh reality that the world has sunk back into crisis as mal-investment, over-investment and associated wealth destruction remain largely concealed so long as financial asset inflation persists. This is true as well for wealth redistribution. The unfolding adjustment process will deflate asset prices so as to converge more closely with deteriorating underlying economic fundamentals.
"... the growing perception that central banks are moving away from QE-style programmes to negative interest rates is less supportive for equities, in our opinion. With little evidence so far that negative rates boost aggregate economic activity, the risk is that this policy tool increasingly resembles a more blatant form of 'beggar thy neighbour' currency devaluation. A shift towards a more nationalistic and perhaps less coordinated global policy response could signal a quickening in the pace of fiat currency debasement and augurs badly for risk appetite, in our view."
Remember the mass layoffs of 2008-2009? The US economy shed millions of jobs quickly and relentlessly, as companies died and the rest fought for survival. Then the Fed and the US government flooded the banks and the corporate sector with bailouts and handouts. The nightmare of 2008 soon became a golden era of 'recovery'. Well, 2016 is showing us that that era is over. And as stock prices cease to rise, and in fact fall within many industries, layoffs are beginning to make a return as companies jettison costs in attempt to reduce losses.
As you might have noticed, the “recovery” story is starting to fall apart...
After yesterday's torrid, chaotic moves in the market, where an initial drop in stocks was quickly pared and led to a surge into the close after a weaker dollar on the heels of even more disappointing US data and Bill Dudley's "serious consequences" speech sent oil soaring and put the "Fed Relent" scenario squarely back on the table, overnight we have seen more global equity strength on the back of a weaker dollar, even if said weakness hurt Kuroda's post-NIRP world and the Nikkei erased virtually all losses since last Friday's surprising negative rate announcement. Oil and metals also rose piggybacking on the continued dollar weakness as the word's most crowded trade was suddenly shaken out.
The List Grows ...
While the biggest news of the night had nothing to do with either oil or China, all that mattered to US equity futures trading also was oil and China, and since WTI managed to rebound modestly from their biggest 2-day drop in years, rising back over $30, and with China falling only 0.4% overnight after the National Team made a rare, for 2016, appearance and pushed stocks to close at the day's high, US E-minis were able to rebound from overnight lows in the mid-1880s, and levitate above 1900. Whether they sustain this level remains to be seen.
After last week's relatively quiet, on macro data if not central bank news, week the newsflow picks up with the usual global PMI survey to start, and end the week with the US January payrolls report.
Something dire has happened to the intelligence and awareness of Western peoples who seem no longer capable of comprehending the machinations of “their” governments. Accountable government in the West is history. Nothing but failure and collapse awaits Western civilization.
How risk should be analysed and used to make better decisions in life
Markets these days have every reason to question the efficacy of global monetary management. Last week saw dovish crisis management vociferation from the ECB’s Draghi. Now the BOJ adopts a crisis management stance. The week also had talk of some deal to reduce global crude supply. Meanwhile, the PBOC injected a weekly record $105 billion of new liquidity. Nonetheless, the Shanghai Composite sank 6.1% to a 13-month low. There was desperation in the air – along with a heck of a short squeeze and general market mayhem.
Education today is an advertising agency which leads us to believe we need the society on which it relies upon for its existence.