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.
A thumbnail sketch of the main events of during the week ahead.
Draghi Reveals More: Will Do Targeted LTRO, Suspends Sterilization, Prepares ABS Purchases; No QE RevealedSubmitted by Tyler Durden on 06/05/2014 07:39 -0500
The much anticipated additional measures have been revealed:
- DRAGHI UNVEILS PACKAGE OF TARGETED LTROS, WORK TO PREPARE QE
- DRAGHI SAYS INITIAL SIZE OF TARGETED LTRO PLAN IS 400BLN EUROS
- ECB EXTENDS FIXED RATE FULL ALLOTMENT, SUSPENDS SMP STERILIZING
- DRAGHI SAYS PACKAGE INCLUDES PREPARATIONS FOR ABS PURCHASES
In other words, even more actions along what was expected: keep in mind the last time the ECB did €1 trillion in LTROs it did exactly nothing to boost inflation or the "real economy." Furthermore, the ABS purchases aren't activated: just being "prepared." However, what was not revealed was the biggest wildcard: European QE, which as we said repeatedly, won't happen until Europe's deflation is far worse, if ever.
It has gotten beyond ridiculous: a few short hours ago the yield on the 10 Year bond tumbled to a fresh low of 2.49% (and currently just off the lows at 2.50%), wiping out all of yesterday's "jump" on better than expected Durables and leading to renewed concerns about the terminal rate, deflation and how slow the US economy will truly grow. Amusingly, this happened just as US equity futures printed overnight highs. Doubly amusing: this also happened roughly at the same time as Spanish 10 Year yields dropped to a record low of 2.827%, or about 30 bps wider than the US (moments after Spain announced that loan creation in the country has once again resumed its downward trajectory and a tumble in retail deposits to levels not seen since 2008). Triply amusing: this also happened just about when Germany had yet another technically uncovered 30 Year Bund issuance, aka failed auction. So yes: nothing makes sense anymore which is precisely what one would expect in broken, rigged and centrally-planned markets (incidentally those scrambling to explain with events in bond world where one appears to buy bonds to hedge long equity exposure, are directed to the minute of the Japanese GPIF pension fund which announced it would buy junk-rated bonds to boost returns - good luck to Japanese pensioners).
The coming week will be busy in terms of data releases in the US; highlights include an improvement in consumer confidence, anemic 1Q GDP growth, and solid non-farm payrolls (consensus expects 215K). Wednesday brings advanced 1Q GDP - consensus expected a pathetic 1.1% qoq, on the back of what Goldman scapegoats as "weather distortions and an inventory investment drag", personal consumption (consensus 1.9%), and FOMC (the meeting is not associated with economic projections or a press conference). Thursday brings PCE Core (consensus 0.20%). Friday brings non-farm payrolls (consensus of 215K) and unemployment (6.6%). Other indicators for the week include pending home sales, S&P/Case Shiller home price index, Chicago PMI, ADP employment, personal income/spending, and hourly earnings.
There is a reasonably quiet start to the week before we head into the highlights of the week including the start of US reporting season tomorrow, FOMC minutes on Wednesday and IMF meetings in Washington on Friday. On the schedule for today central bank officials from the ECB including Mersch, Weidmann and Constancio will be speaking. The Fed’s Bullard speaks today, and no doubt there will be interest in his comments from last week suggesting that the Fed will hike rates in early 2015.
Yesterday we reported that in an attempt to unclog Europe's broken credit and monetary piping, European regulators are preparing to get their hands dirty by easing rules on, and unleashing, an asset class once labelled toxic sludge, i.e., all the worst of the worst debt that was the reason why Europe is in a 6 year-old depression, and hope and pray it somehow fixes itself. Today, the ECB reported the latest data on European credit creation in the private sector. Or rather lack thereof. Because at -2.2%, this was essentially an all time low private sector loan "growth" (rather, credit destruction). Which means Europe will have to throw all the toxic sludge it can find in its desperation to reignite yet another credit bubble, something Bernanke's cronies appear to have done far more admirably.
After tumbling overnight to just around 101.80, the USDJPY managed to stage a remarkable levitating comeback, rising all the way to 102.3, which in turn succeeded in closing the Nikkei 225 at the highs, up 1% after tumbling in early trade. The Shanghai Composite was not quite as lucky and as fear continue to weigh about a collapse in China's credit pipeline, the SHCOMP was down more than 0.8% while the PBOC withdreww even more net liquidity via repos than it did last week, at CNY 98 billion vs CNY 48 billion. That said, this morning will be the fifth consecutive overnight levitation in futures, which likely will once more surge right into the US market open to intraday highs, at which point slowy at first, then rapidly, fade again as the pattern has seemingly been set into algo random access memory. Which in a market devoid of human traders is all that matters.
Draghi's Monetary Nightmare Refuses To End As European Private Lending Remains Stuck At Record Low LevelsSubmitted by Tyler Durden on 02/27/2014 08:24 -0500
With just released inflation figures out of Germany coming weaker than expected, Mario Draghi's monetary nightmare - how to spur credit creation in Europe to the private sector - just got even worse. Incidentally the topic of Draghi's "Monetary Nightmare" is well-known to regular readers and has been covered here extensively in the past, most recently here. So while we await to see how the ongoing deflation in Europe, soon hitting its core too, spreads through the system, the most recent data out of Europe is that lending to non-financial corporations declined once again in January, this time by €11.7billion, adjusted for securitizations and sales. On an annual basis, the decline in January was -2.0%, the same as December, and worse than the -1.8% in November as reported by the ECB.
Three unlucky attempts in a row to retake the S&P 500 all time high may have been all we get, at least for now, because the fourth one is shaping up to be rather problematic following events out of the Crimean in the past three hours where the Ukraine situation has gone from bad to worse, and have dragged the all important risk indicator, the USDJPY, below 102.000 once again. As a result, global stock futures have fallen from the European open this morning, with the DAX future well below 9600 to mark levels not seen since last Thursday. Escalated tensions in the Ukraine have raised concerns of the spillover effects to Western Europe and Russia, as a Russian flag is lifted by occupying gunmen in the Crimean (Southern Ukrainian peninsula) parliament, prompting an emergency session of Crimean lawmakers to discuss the fate of the region. This, allied with reports of the mobilisation of Russian jets on the Western border has weighed on risk sentiment, sending the German 10yr yield to July 2013 lows.
The wild volatility continues, with markets set to open well in the negative wiping out all of yesterday's gains and then some, only this time the catalyst is not emerging market crashing and burning (at least not yet even though moments ago the ZAR weakened to a new 5 year low against the USD and the USDTRY is reaching back for the 2.30 level) but European inflation, where the CPI printed at 0.70%, dropping once again from 0.8%, remaining under 1% for the fourth straight month and missing estimates of a pick up to 0.9%. Perhaps only economists are surprised at this reading considering last night Japan reported its highest (energy and food-driven) inflation print in years: so to explain it once again for the cheap seats - Japan is exporting its "deflation monster", Europe is importing it. It also means Mario Draghi is again in a corner and this time will probably have to come up with some emergency tool to boost European inflation or otherwise the ECB will promptly start to lose credibility - is the long awaited unsterilized QE from the ECB finally imminent?
The Fed tightens by a little (sorry, tapering - flow - is and always will be tightening): markets soar; Turkey tightens by a lot: markets soar. If only it was that easy everyone would tighten. Only it never is. Which is why as we just reported, the initial euphoria in Turkey is long gone and the Turkish Lira is basically at pre-announcement levels, only now the government has a furious, and loan-challenged population to deal with, not to mention an economy which has just ground to a halt. Anyway, good luck - other EMs already faded, including the ZAR which many are speculating could be the next Turkey, and certainly the USDJPY which sent futures soaring last night, only to fade all gains as well and bring equities down with it.