Jim Reid

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"One Of The Defining Investment Moments Of The Next Few Years"





"Herein lies our dilemma with bonds. We've been a member of the lower yields for longer camp for a number of years now due to our near-term growth and inflation outlook and our belief that financial repression is rife. However we also think that debt restructuring or inflation will eventually be the only way of successfully reducing debt burdens for many countries with the latter route the most likely. As such whilst bonds are a near-term safe haven they are also likely to be very poor real investments longer term. Timing the big switch in view on this will be one of the defining investment moments of the next few years. Let's hope we're lucky."

 
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US Futures Levitate To New All Time High As USDJPY Surges Above 105; Gold Slammed





Just when we thought centrally-planned markets could no longer surprise us, here comes last night's superspike in the USDJPY which has moved nearly 100 pips higher in the past few trading days and moments ago crossed 105.000. The reason for the surprise is that while there was no economic news that would justify such a move: certainly not an improving Japanese economy, nor, for that matter, a new and improved collapse, what the move was attributed to was news that Yasuhisa Shiozaki, who has been advocating for the GPIF to reduce allocation to domestic bonds, may be appointed the Health Minister when Abe announces his new cabinet tomorrow: a reshuffle driven by the fact that the failure of Abenomics is starting to anger Japan's voters. In other words, the GPIF continues to be the "forward guidance" gift that keeps on giving, even if the vast majority of its capital reallocation into equities has already long since taken place. As a result of the USDJPY surge, driven by a rumor of a minister appointment, the Nikkei is up+1.2%, which in turned has pushed both Europe and Asia to overnight highs and US equity futures to fresh record highs, with the S&P500 cash now just 40 points away, or about 4-8 trading sessions away from Goldman's revised 2014 year end closing target.

 
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Markets Set To Surge On Global Manufacturing PMI Bloodbath





If last week's disappointing global economic data, that saw Brazil added to the list of countries returning to outright recession as Europe Hamletically debates whether to be or not to be in a triple-dip, was enough to push the S&P solidly above 2000, even if on a few hundreds ES contracts (traded almost exclusively between central banks), then the overnight massacre of global manufacturing PMIs - when not one but both Chinese PMIs missed spurring calls for "more easing" and pushing the SHCOMP up 0.83% to 2,235.5 - should see the S&P cross Goldman's revised year end target of 2050 (up from 1900) sometime by Thursday (on another few hundreds ES contracts).

 
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S&P Futures Surge Over 2000, At Record High, On Collapsing Japanese, European Economic Data, Ukraine Escalations





Following Wednesday's laughable tape painting close where an algo, supposedly that of Citadel under the usual instructions of the NY Fed, ramped futures just over 2,000 to preserve faith in central planning, yesterday everyone was expecting a comparable rigged move... and got it, only this time milliseconds after the close, when futures moved from solidly in the red, to a fresh record high in seconds on no news - although some speculate that Obama not announcing Syrian air strikes yesterday was somehow the bullish catalyst - and purely on another bout of algo buying whose only purpose was to preserve the overnight momentum. Sure enough, this morning we find that even as bond yields around the world continue to probe 2014 lows, and with the Ruble sinking to fresh record lows as the Ukraine situation has deteriorated to unprecedented lows, so US equity futures have once, driven by the now generic USDJPY spike just after the European open, again soared overnight, well above 2000 and are now at all time highs, driven likely by the ongoing deflationary collapse in Europe where August inflation printed 0.3%, the lowest since 2009 while the unemployment remained close to record high, while the Japanese economic abemination is now fully featured for every Keynesian professor to see, with the latest Japanese data basically continuing the pattern of sheer horror as we reported yesterday.

 
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Futures Slide As Ukraine Fighting "Re-Escalates" Again





If you like your de-escalation, you can keep your de-escalation. To think that heading into, and following the Russia-Ukraine "summit" earlier this week there was so much hope that the tense Ukraine civil war "situation" would somehow fix itself. Oh how wrong that thinking was considering overnight, following rebel separatists gains in the southeast of Ukraine which included the strategic port of Novoazvosk and which is "threatening to open up a new front in the war" including setting up a land corridor to Russia controlled-Crimea, Ukraine's president Poroshenko for the first time came out and directly accused Russia of an "Invasion", or at least a first time in recent weeks, saying he has convened the security council on the recent Russian actions.

 
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De-Escalation Algo Pushes Futures To Overnight Highs





It is unclear exactly why stock futures, bonds - with European peripheral yields hitting new record lows for the second day in a row - gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the "de-escalation" algo as a meeting between Russia and Ukraine begins today in Belarus' capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn't say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).

 
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Janet Yellen's J-Hole Speech: Slack Remains, QE Is Over, Rates Could Rise Sooner (Or Later)





Not  full-dovish, risk assets face tremendous downside potential. Key highlights: YELLEN SAYS FOMC SEES SIGNIFICANT UNDER-USE OF LABOR RESOURCES; YELLEN SEES ROOM FOR WAGE INCREASES THAT DON'T BOOST INFLATION; YELLEN REITERATES ASSET BUYING TO BE COMPLETED IN OCTOBER; YELLEN SAYS FASTER PROGRESS ON GOALS MAY BRING RATE RISE SOONER

 
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Futures Tread Water As Ukraine Tries To Steal The Jackson Hole Scene





While today's key events were supposed to be the Jackson speeches first by Janet Yellen at 10:00am Eastern and then by Mario Draghi at 2:30 pm, Ukraine quickly managed to steal the spotlight yet again when moments after the first Russian humanitarian aid convoys entered Ukraine allegedly without permission, Kiev first accused Russia of staging a direct invasion, even if moments later it changed its tune and said it had allowed the convoy in to "avoid provocations." In other words, your daily dose of Ukraine disinformation, which initially managed to push futures down some 0.3% before futs regained virtually all losses on the subsequent clarifications. Expect much more conflicting, confusing and very provocative headlines out of Kiev as the local government and the CIA try to get their story straight.

 
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Futures Flat With All Headline-Scanning Algo Eyes On Today's FOMC Minutes





While everyone's (algorithmic) attention will be focused on today's minutes from the July 29-30 FOMC meeting for views on remaining slack in U.S. economy following recent changes in the labor market (especially a particularly solid JOLTS report which indicates that at least on the openings front, there is no more) and any signal of policy change by the Fed ahead of Fed Chair Janet Yellen’s speech in Jackson Hole on Aug. 22, a curious thing happened overnight when a few hours ago the BoE's own minutes show the first vote split since 2011, as Weale and McCafferty argue for a 0.75% bank rate. Then again, if the Russians are finally bailing on London real estate, the inflationary pressures at the top of UK housing may finally be easing. In any event, every FOMC "minute" will be overanalyzed for hints of what Yellen's speech on Friday morning will say, even if stocks just shy of all time highs know quite well she won't dare say anything to tip the boat despite her warnings of a biotech and social network bubble.

 
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Futures Levitate Because Any Re-escalation Is Simply Pent Up De-escalation





A quick reminder of how geopolitics governs markets: on Friday, the market plunged 0.005% over fears Ukraine and Russia may be about to go at it all out after a fake report Ukraine shelled a Russian military convoy. On Monday, the same "market" soared just under 1% as the news that had caused the "crash" was refuted. That has been the dominant rinse, repeat theme for the past month and will continue to be well after Yellen's Friday speech at Jackson Hole (although one does wonder why she is not speaking on Wednesday when the symposium begins). Not surprisingly, with only modest re-escalation news overnight (that Russia is preparing further retaliatory sanctions against the West), which is simply "pent up de-escalation" in the eyes of Keynesian algos, futures are again up a solid 0.2% and rising, and the way the rampy USDJPY is being manipulated before its pre-market blast off, we may well see the S&P hit 1980, if not a new all time high before 9:30am, let alone during today's cash session. In any event, whatever you do, don't you dare suggest that algos should care one bit about Ferguson and its implications for US society.

 
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Risk On After Ukraine's "Convoy Shelling" Hoax Forgotten





Friday's main event, Ukraine's alleged attack of a Russian military convoy, has come and gone, and as we mused on Friday has promptly faded into the memory of all other fabricated headlines released by the country engaged in a major civil war and an even more major disinformation war. To be sure, Germany's DAX has recovered virtually all losses, US futures are up about 9 points, and the 10 Year is back to 2.37%. One wonders what algo-slamming headline amusement Ukraine has in stock for us today, although anyone hoping for a quick "de-escalation" (there's that word again) will have to wait following yesterday's meeting of Russian, Ukraine, German and French ministers in Berlin where Russia's Lavrov said he saw no progress on Ukraine cease-fire, Foreign Minister Sergei Lavrov says in Berlin, adding that a cease-fire should be unconditional.

 
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Futures Continue Levitation On More "Deescalation" Hopes Despite UK Warning Russia Of "Serious Consequences"





There were headlines for everyone this morning, but especially for fans of what is increasingly known as Russia's "Schrodinger Invasion" of East Ukraine: one which may or may not be happening depending on i) one's point of view and ii) how one is observing it.

 
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Here Comes The European Triple-Dip: Negative German GDP Sends Bunds Under 1% For The First Time Ever





The hammer finally hit for Europe when overnight both Germany and France reported Q2 GDP prints that missed expectations, the first actually contracting at a 0.2% rate with consensus looking for -0.1%, while France remained flat vs expectations for a tiny 0.1% rise. As a reminder, this GDP is the revised one, which already includes the estimated contribution of drugs and prostitution, suggesting the actual underlying economic growth is far worse than even reported. Then again, this is hardly surprising considering all the abysmal data out of Europe and the rest of the world in recent weeks, and with the Russian trade war sure to trim even more growth, look for all of Europe to join Italy in its first upcoming triple-dip recession in history.

 
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Just The Right Amount Of Bad Overnight News To Ramp Global Equities





If it was crashing German business confidence yesterday setting the somber mood for European economic "growth" in the second half, with a European GDP decline if not outright contraction now almost practically inevitable, then overnight it was disappointing data from virtually every other spot in the globe (and Europe again) to hammer the message in, starting with a historic 6.8% drop in Japanese GDP driven by a record plunge in consumption, quickly followed by total social financing out of China which in aggregate rose by only RMB273.1bn in July, or just 18% of what was expected, with missing industrial production and retail sales just the cherry on top. Then it was Europe's turn again, where June Industrial Production contracted -0.3% on expectations of a 0.4% increase, to set the stage for tomorrow's Eurozone GDP print which, following Italy's triple-drip recession shocker last week, probably means it will be not only Japan but also Europe which are about to have taken a sharp move for the worse. All of which of course, explains why just as Europe opened, the USDJPY blasted off and took both EuroSTOXX and US equity futures higher with it, and at last check ES was some 10 higher.

 
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Enough Bad News Overnight To Send Futures Higher On Turbo Tuesday





If the global equity "markets" were in need of a sharp "horrible news is great news" boost overnight, it came courtesy of Germany's ZEW investor confidence survey, which printed at a stunning 8.6, a plunge from the 27.1 in July and far below the 17.0 expected - the lowest print since December 2012 -largely suggesting that a European triple-dip is all but assured. And if that wasn't enough, strong language from John Kerry, assured to fan the flames of geopolitical instability, came hours ago when the US SecState said even more Russian sanctions may be coming. And just to make sure the NY Fed trading desk has to come up with a new narrative is the latest development in the Russian "humanitarian convoy" saga, which as we reported last night, has departed Russia but which Ukraine is now refusing to allow into its country. All in all, it's is setting up to be another super bullish day in the rigged markets for which all that matters is... Tuesday.

 
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