JPMorgan Cazenove's global equity strategy group has decided enough is enough - the underperformance of the Eurozone is getting stretched (they note), and are upgrading Euro equity allocations to Overweight at the expense of an Underweight in US stocks. Here are the fives reasons why they made the shift...
Having served up a large bowl of nothing with the official statement, the job of jawboning 'hope' for future monetary policy idiocy falls once again on Mario Draghi's shoulders as he takes the stage in what may well be a highly contentious press conference. Will he admit the mutiny? Will he 'fess up that OMT is a mirage? Will he admit to being a secretive dictator? Will he remove his spectacles and angrily point at a reporter?
A look at the currency market as if analysis mattered.
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.
The week ahead, as if it mattered.
What’s the true risk for the global economy? Its pronounced: /d??fl?SH(?)n/
A prelude for the monetary madness...
Inflation, defined as an expansion of the supply of unbacked money, is an elementary evil, always and everywhere that it occurs. It is the ignored and core cause of numerous problems in the economy and in society...
Dispassionate overview of the week ahead, with thoughts about September.
Recall what we said earlier today: the proxy war Ukraine conflict, just like that in Syria preceding it, "is all about energy." Recall also the following chart showing Ukraine's shale gas deposits, keeping in mind that the Dnieper-Donets basin accounts for approximately 90 per cent of Ukrainian production. Finally, recall our story from May that Joe Biden's son, Hunter, just joined the board of the largest Ukraine gas producer Burisma Holdings. Now put it all together and you will like figure out what will happen next.
Following yesterday's disappointing results by Visa, which is the largest DJIA component accounting for 8% of the index and which dropped nearly 3%, while AMZN's 10% tumble has weighed heavily on NASDAQ futures, it has been up to the USDJPY to push US equity futures from dropping further, which it has done admirably so far with the tried and true levitation pump taking place just as Europe opened. One thing to keep in mind: yesterday the CME quietly hiked ES and NQ margins by 6% and 11% respectively. A modest warning shot across the bow of what may be coming down the line?
here is the punchline, and proof that anything the ECB can and will try to do, will be a complete disaster: Loans to households fell by €42.8bn (its largest decline on record), having risen by €5.1bn in April. This was mainly related to lending for house purchases (which do not count towards banks' allotment in the TLTRO) and took place almost entirely in France.
The holiday shortened, and very busy, week includes the following highlights: [on Monday] US Chicago PMI; [on Tuesday] US ISM Manufacturing, Construction Spending, and Vehicle Sales, in addition to a host of PMI Manufacturing in various countries; [on Wednesday] US ADP Employment, Factory Orders; [on Thursday] US Non-farm Payrolls and Unemployment, MP Decisions by ECB and Riksbank, in addition to various Services and Composite PMIs; [on Friday] US holiday, Germany Factory Orders and Sweden IP.