While US floor markets are closed for the Thanksgiving holiday (equity, rates and energy futures are open until 1pm Eastern), Europe and Asia (as well as US equity futures) were busy rebounding overnight on strength in the commodity complex following yesterday's news that China's metals producers have asked for a wholesale government bailout or the "QEmmodity" as we have dubbed it, for the first time since 2009, which together with news that China would soon start arresting "malicious metal sellers" has provided a push for commodity prices across the board.
Following yesterday's dramatic geopolitical shock, U.S. equity index futures rise as Russia has not escalated the confrontation with Turkey as some had feared, while Asian shares fall, reversing earlier gains. European stocks are rallying and the euro is falling on the back of a Reuters report that the ECB is mulling new measures to prop up lending, although it’s not clear at this point what the real impact from these measures would be.
It had been a relatively quiet session overnight when as reported previously, the geopolitical situation in the middle east changed dramatically in a moment, when NATO-member country Turkey downed a Russian fighter jet allegedly over Turkish territory even though the plane crashed in Syria, and whose pilots may have been captured by local rebel forces. The news promptly slammed Turkish assets and FX, sending the Lira tumbling, pushing lower European stocks and US equity futures while sending 2 Year German Bunds to record negative yields.
"The hardest questions we are trying to reconcile here are how is that possible to see all these signs of weakness under the surface being balanced by very strong equity markets and upbeat employment picture. One of these sides has to be wrong..."
As a result of the global commodity weakness, global stocks have fallen for the first time in six days as the sell-off in commodities continued, dragging both US equity futures and European stocks lower. However, putting this in context, last week the MSCI All Country World Index posted its biggest weekly gain in six weeks: alas, without a coincident rebound in commodity prices, it will be merely the latest dead cat bounce.
Futures are modestly higher in early trading having tracked the USDJPY once again almost tick for tick, with the carry trade of choice rising to 123 shortly after Mario Draghi's latest speech pushed the dollar strong initially only to see most gains promptly evaporate against both the Yen and the Euro. European shares are likewise little changed, after gaining earlier, while Asian stocks rise; oil also advanced in early trading only to drop to its lowest overnight level moments ago, a few dimes over $40, with aluminum and copper both posting modest increases.
While it is still unclear just why the FOMC Minutes which are said to have made a December liftoff "more likely" unleashed a dramatic market rally, one which sent both stocks and TSYs higher, the sentiment continued overnight, with both Asian stocks surging on the US momentum, as well as Europe, where the DAX gapped solidly above the 200 DMA as most European shares advanced, led by resources, travel stocks. U.S. futures continue their ramp higher, and at last check were another 8 points, or 0.4%, in the green. But if the Fed Minutes were enough to unleash the latest leg in this rally, than the ECB's own minutes due also today, should send futures back over 2100 without much difficult, regardless of their actual content.
Global Stocks Tread Water After Two Consecutive Terrorist Scares; Oil Rises, Industrial Metals TumbleSubmitted by Tyler Durden on 11/18/2015 07:03 -0500
If this weekend's gruesome terrorist attack on Paris ended up being hugely bullish for stocks, then two subsequent events, a stadium-evacuation scare in Hannover (where Angela Merkel was supposed to be present) and a raid in north Paris which left several dead in the ongoing manhunt against the alleged ISIS mastermind, appear to have but some question into if not stocks then algos whether a rising wave of terrorist hatred across Europe is truly what central bankers need to unleash more QE. That said, we expect the current weakness to last only until the traditional USDJPY carry ramp pushes stocks traditionally higher.
Stocks Jump On Hope For More Central Bank Intervention After Japan's Quintuple Recession, Syrian StrikesSubmitted by Tyler Durden on 11/16/2015 07:03 -0500
As so often happens in these upside down days, was the best thing that could happen to the market, because another economic slowdown means the BOJ, even without sellers of JGBs, will have no choice but to expand its "stimulus" program (the same one that led Japan to its current predicament of course) and buy up if not government bonds, then corporate bonds, more ETFs (of which it already own 50%) and ultimately stocks. Because there is nothing better for the richest asset owners than total economic collapse.
For once, the overnight session was not dominated by weak Chinese economic data (which probably explains why the Shanghai Composite dropped for the second day in a row, declining 1.4%, and ending an impressive run since the beginning of November) and instead Europe took the spotlight with its own poor data in the form of Q3 GDP which printed below expectations at 0.3% Q/Q, down also from the 0.4% increase in Q2, with several key economies rolling over including Germany, Italy, and Spain while Europe's poster child of "successful austerity" saw Q3 GDP stagnate, far worse than the 0.5% growth consensus expected.
The biggest event overnight came from Europe, where Draghi managed to once again jawbone the Euro lower by ober 50 pips when he told European lawmakers in a prepared testimony that downside economic risks are "clearly visible," repeating his October press conference statement, adding that the ECB will reexamine degree of accommodation in December as "inflation dynamics have somewhat weakened." And the statement that crushed the Euro: "If we were to conclude that our medium-term price stability objective is at risk, we would act by using all the instruments available within our mandate to ensure that an appropriate degree of monetary accommodation is maintained." I.e., another "whatever it takes" moment.
For the third day in a row, China dominated the overnight newsflow with the latest industrial output data, which printed at 5.6% missing expectations of a 5.8% increase, and was tied with March for the lowest print since late 2008.
Global Stocks Fall For 5th Day On Disturbing Chinese Inflation Data; Renewed Rate Hike Fears; Copper At 6 Year LowSubmitted by Tyler Durden on 11/10/2015 06:58 -0500
The ongoing failure of China to achieve any stabilization in its economy, after already cutting interest rates six times in the past year, and the prospect of a U.S. interest rate hike in December, had made markets increasingly jittery and worried which is not only why the S&P 500 Index had its biggest drop in a month, but thanks to the soaring dollar emerging market stocks are falling for a fourth day - led by China - bringing their decline in that period to almost 4 percent, and the global stock index down for a 5th consecutive day.
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.
Deutsche Bank: "This Is Yet Another Sign Showing How Broken The Financial Market Is Around The World"Submitted by Tyler Durden on 11/06/2015 07:16 -0500
"Before September we'd only ever seen negative 10y swap spreads for a period in 2010 although they did turn negative intra-day 3-years ago. It’s not quite up there with the flash rally/crash in Treasuries 13 months ago but it’s a very strange occurrence and one to watch and likely another product of regulation and liquidity."