Who would have thought all it takes for Eurozone Q4 GDP to print above expectations, even if by the smallest of possible margins - one which even the Chinese goalseek-o-tron bows its head down to in respect - which at 0.3% Q/Q was above the 0.2% expected and above Q3's 0.2%, was for Europe to admit it has finally succumbed to deflation. Oh, and for the ECB to admit the situation has never been more serious by launching Q€. Oh, and add the "estimated contribution" to GDP from hookers and drugs. Put all that together and on an annualized basis, the European economy grew by 1.4%. Whatever the reason, Q4 GDP was the best print since Q1, even as Germany blew not only consensus of 0.3%, but the highest GDP estimate of 0.6% out of the water when it reported that courtesy of a spike in spending, its economy grew by 0.7% in the fourth quarter, up from the near-recessionary 0.1% in Q3. That, together with QE and ZIRP now raging across the continent, was enough to push the DAX above 11,000 for the first time ever.
Following last month's narrative-crushing drop in retail sales, despite all that low interest rate low gas price stimulus, January was more of the same as hopeful expectations for a modest rebound were denied. Falling 0.8% (against a 0.9% drop in Dec), missing expectations of -0.4%, this is the worst back-to-back drop in retail sales since Oct 2009. Retail sales declined in 6 of the 13 categories.
It is very difficult for governments to control the progress of a monetary union break-up because the example of one country exiting will create a precedent in the eyes of other members of the monetary union. The transmission channel is not government bonds, nor equities, not currency markets, but banks. In the event of a Greek exit from the euro, the loss in the real value of Greek bank deposits would encourage bank depositors in other countries to withdraw their funds.
The process can be very rapid indeed.
"According to the University of Michigan survey, consumers have not been this upbeat since January 2004, when the economy was booming. The natural outcome should be for consumers to splurge, hitting the malls and going out to restaurants. But much to our surprise, the data suggest otherwise." - BofA
In the absence of any notable developments overnight, the market remains focused on the rapidly moving situation in Greece, which as detailed over the weekend, responded to Europe's Friday ultimatum very vocally and belligerently, crushing any speculation that Syriza would back down or compromise, and with just days left until the emergency Eurogroup meeting in three days, whispers that a Grexit is imminent grow louder. The only outstanding item is what happens to the EUR and to risk assets: do they rise when the Eurozone kicks out its weakest member, or will they tumble as UBS suggested this morning when it said that "the escalation of tensions between the Greek government and its creditors is so far being shrugged off by investors, an attitude which is overly simplistic and ignores the risk of market dislocations" while Morgan Stanley adds that a Grexit would likely lead to the EURUSD sliding near its all time lows of about 0.90.
The NYT Exposes The Criminal Money-Laundering Underworld Supporting Manhattan's Luxury Housing BubbleSubmitted by Tyler Durden on 02/07/2015 16:02 -0400
“We like the money,” said Raymond Baker, the president of Global Financial Integrity, a Washington nonprofit that tracks the illicit flow of money. “It’s that simple. We like the money that comes into our accounts, and we are not nearly as judgmental about it as we should be”... Mayor Michael R. Bloomberg said on his weekly radio program in 2013, shortly before leaving office: “If we could get every billionaire around the world to move here, it would be a godsend.”
The overnight session had been mostly quiet until minutes ago, when unexpectedly WTI, which had traded down as low as the mid $46 range following the weakest Chinese manufacturing data in two years, saw another bout of algo-driven buying momentum which pushed it sharply, if briefly, above $50, and was last trading about 2.6% higher on the day. In today's highly correlated market, this was likely catalyzed by a brief period of dollar weakness as well as the jump of EURCHF above 1.05, within the rumored corridor implemented by the Swiss National Bank, which apparently has not learned its lesson and is a glutton for a second punishment, after its hard Swissy cap was so dramatically breached, it hopes to repeat the experience with a softer one around 1.05. Expect to see even more FX brokers blowing up once the EURCHF 1.05 floor fails to hold next.
While the US daytime trading session has lately become a desperate attempt to expand multiples on the declining earnings of the S&P500, thanks to recurring BOJ intervention in the USDJPY, to keep the S&P above the 100 SMA at all costs including generous central banker verbal intervention then it is during the US overnight session when global deflationary reality reasserts itself with a vengeance, and sure enough at last check, the 10 Year has rallied with 10Y yield hitting 1.71% before this morning’s 4Q GDP release, as well as following the latest deflation number of -0.6% out of Europe (worse than the -0.5% expected) which was the biggest price decline on the continent since 2009. "Treasuries remained well bid overnight due to month-end index adjustments. Some talk of a reallocation from equities to bonds trade going through in both Asia and continuing in Europe," ED&F Man head of rates and credit trading Tom di Galoma wrote in a note to explain the latest Great Unrotation, if only until the Virtu HFT algos get the full blessing of the Fed to ramp the USDJPY, and thus the stock market.
Market Wrap: Chinese Stocks Crash As Financials Suffer Record Drop; Commodities Resume Decline; US ClosedSubmitted by Tyler Durden on 01/19/2015 08:12 -0400
Following last week's Swiss stock market massacre as a result of a central bank shocker, and last night's crack down by Chinese authorities, it almost appears as if the global powers are doing what they can to orchestrated a smooth, painless (as much as possible) bubble deflation. If so, what Draghi reveals in a few days may truly come as a surprise to all those- pretty much everyone - who anticipate a €500 billion QE announcement on Thursday.
Top ten things that investors will likely be watching in the week ahead.
Since 2011, we have been warning of the rise of 'civil asset forfeiture' (here) with the 'stealing of American's hard-earned assets' having been on the rise signficantly in recent months; as the apparent final stage of empire begins. However, in an odd apparent success for "safeguarding civil liberties," Reuters reports that U.S. Attorney General Eric Holder said today that State and local police in the United States will no longer be able to use federal laws to justify seizing property without evidence of a crime.
One day after the SNB stunner roiled markets, overnight global markets have seen - as expected - substanial downward pressure, with the Swiss market slide resuming post open, while European stocks have seen some pressure despite what is now an assured ECB QE announcement next week. However, the one trade that can not be mistaken is the global rush into the safety of government paper, with every single treasury yielding less today than yesterday (the Swiss 10Y was trading below 0% at last check), except for Greek 10Y which are wider on deposit run fears. That said, with capital market liquidity absolutely non-existent even the smallest trade has a disproportionate effect on futures, and expect to see much more rangebound trading until the damage report from the SNB action is fully digested, something which will take place over the weekend.
For Sale To The Highest Bidder – How Middle Eastern Governments Are Buying Off The US Political ProcessSubmitted by Tyler Durden on 01/14/2015 00:15 -0400
The quaint notion that the U.S. political system remotely resembles either a Republic or a Democracy should have been abandoned long ago. Any lingering illusions were surely extinguished last year, when an academic study empirically proved that the USA is nothing more than a corrupt oligarchy...