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.
A mere two weeks since former JPMorgan banker, Kenneth Bellando jumped to his death, Bloomberg reports that the former CEO of Dutch Bank ABN Amro (and his wife and daughter) were found dead at their home after a possible "family tragedy." This expands the dismal list of senior financial services executive deaths to 12 in the last few months. The 57-year-old Jan Peter Schmittmann, was reportedly discovered by his other daughter when she arrived home that morning. Police declined to comment on the cirumstances of his (and his wife and daughter's) death. This is not the first C-level ABN Amro banker to be found dead. In 2009, former CFO Huibert Boumeester was discovered with (assumed self-inflicted) shotgun wounds.
Update: in direct flashback from the summer of 2011 when the ECB leaked news only to retract it within minutes, this just happened: CONSTANCIO: DOESN'T KNOW ABOUT 1 TLN-EURO QE MODEL REPORT
When in desperate need to crush your currency (being bought hand over fist by the Chinese), so urgently need to boost German exports, since you are unable to actually do QE as per your charter, what do you do if you are Mario Draghi? Well, you leak, leak, leak that you are contemplating QE, and then you leak some more. Such as today.
- ECB HAS MODELED BOND PURCHASES UP TO 1 TLN EUROS, FAZ SAYS
- ECB TESTS SHOW INFLATION COULD BE BOOSTED 0.2% TO 0.8%: FAZ
Like US inflation soared on the $1 trillion QEternity? Can't wait. In other news, expect zero reaction from gold on this latest news that another $1.4 trillion in fiat is about to flood the market. If only inbetween Mario Draghi's jaw bones.
- U.S. Small-Cap Rally Sends Valuation 26% Above 1990s (BBG)
- Russian troops seize Ukraine marine base in Crimea (Reuters)
- Apple in Talks With Comcast About Streaming-TV Service (WSJ)
- Top J.P. Morgan Executive in China to Leave Bank (WSJ)
- Treasury's Lew to undergo treatment for enlarged prostate (Reuters)
- Billionaire Sought by U.S. Holds Key to Putin Gas Cash (BBG)
- Israel closes embassies around the world as diplomats strike (Reuters)
- Herbalife to Nominate Three More Icahn Candidates to Board (BBG)
- Australian ship homes in on possible debris from Malaysia plane (Reuters)
- California DMV Investigating Potential Credit Card Breach (WSJ)
Well over a week after the disappearance of flight MH370 - which now is the longest official disappearance of a modern jet in aviation history - with no official trace of the missing plane yet revealed, the investigation, which as we reported over the weekend has focused on the pilots and specifically on Captain Zaharie Ahmad Shah, earlier today revealed that on his home-made flight simulator had been loaded five Indian Ocean practice runways, among which those of Male in the Maldives, that of the US owned base at Sergio Garcia, as well as other runways in India and Sri Lanka - all notable runways as all are possible landing spots based on the flight's potential trajectories. The Malay Mail Online reported, "The simulation programmes are based on runways at the Male International Airport in Maldives, an airport owned by the United States (Diego Garcia), and three other runways in India and Sri Lanka, all have runway lengths of 1,000 metres."
Goldman's February Final Global Leading Index places the global industrial cycle in the "Slowdown" phase, with positive but decreasing Momentum indicating a soft-patch in global growth. The infamous Swirlogram has now shifted to a more negative stance than a year ago as 8 of the 10 factors worsened in Feb. Goldman remains unapologetically optimistic that this is 'weather'-related but we do note that the weakness is global in nature. In the US, despite beats in 'select' data, the US macro surprise index has started the year with its biggest fall since 2008.
The [growing deficits of the past 50 years] suggest that we’ve never been in a predicament comparable to today. Essentially, the world’s developed countries are following the same path that’s failed, time and again, in chronically insolvent nations of the developing world. Look at it this way: the chart shows that we’ve turned the economic development process inside out. Ideally, advanced economies would stick to the disciplined financial practices that helped make them strong between the early-19th and mid-20th centuries, while emerging economies would “catch up” by building similar track records. Instead, advanced economies are catching down and threatening to throw the entire world into the kind of recurring crisis mode to which you’re accustomed if you live in, say, Buenos Aires.
So it’s been Christmas and the holiday season and Santa had his sacks stuffed with chocolate. Then it was Cupid and Valentine’s Day and the chocolate got bought up in the shops and the loved one’s will be complaining that they put on too much on their hips or the boyfriend felt sick after gorging himself on the stuff and you still reply they look chocolate-boxy and fine.
Becoming more like Europe is not a good thing. But that is the path that we are currently on. For the most part, Europeans live in a socialist “Big Brother” system in which the government completely dominates your life from the cradle to the grave. Of course there are differences from country to country, but generally speaking the lives of most Europeans are very tightly regulated. You see, the truth is that high levels of individual liberty and freedom are considered to be “dangerous” by the European elite. They believe that if we are all allowed to just do whatever we want that it would result in utter chaos. They are convinced that life is better when those that are smarter (them) control the lives of everyone else.
So far the overnight session has been a replica of yesterday, with the all important carry trade once again fizzling overnight during Japan trading hours, and dipping as low at 101.60 before staging a modest rebound to the 101.8 level. We expect the "invisible" 102.000 USDJPY tractor beam to be again engaged shortly and provide market support and/or levitate stocks higher as the now standard selling in Japan, buying in the US trade pattern repeats. On the other hand, US equity futures appear to have decoupled from the pure carry trade, and instead latched on to USD weakness and EUR strength following European Q4 GDP data, which came at 0.3% on expectations of 0.2%, up from 0.1%. Considering the constant adjustments to the European definition of GDP, at this point Mongolia would have been able to demonstrate growth if it was in Europe (but apparently not Greece which once again missed GDP expectations with Q4 GDP of -2.6% vs Exp. -2.0%). Expect ES and USDJPY to recouple shortly, as they always do - the only question if the recoupling will take place lower or higher.
- Frustrated by Karzai, U.S. Shifts Afghanistan Exit Plans (WSJ)
- Yellen Testimony Guide From Payrolls Report to Emerging Markets (BBG)
- Gold hits three-month high, shares up ahead of Yellen (Reuters)
- Tightfisted New Owners Put Heinz on Diet (WSJ)
- Senator describes "gruesome" bin Laden photos (Reuters)
- More reasons for the ongoing economic contraction: U.S. Winter Storm Seen Spreading Snow, Sleet Across South (BBG)
- Barclays Cuts Up to 12,000 Jobs as Quarterly Profit Falls (BBG)
- Boeing Considering 787-Size Medium-Range Jetliners (WSJ)
- AOL Chief Apologizes for ‘Distressed Babies’ Comment (BBG)
The following chart shows that we’ve turned the economic development process inside out. Ideally, advanced economies would stick to the disciplined financial practices that helped make them strong between the early-19th and mid-20th centuries, while emerging economies would “catch up” by building similar track records. Instead, advanced economies are catching down and threatening to throw the entire world into the kind of recurring crisis mode to which you’re accustomed if you live in, say, Buenos Aires. Here are eight reasons why things got so bad!
The US wants its dollar system to prevail for as long as possible. It therefore has every interest in preventing a ‘rush out of dollars into gold’. By selling (paper) gold, bankers have been trying in the last few decades to keep the price of gold under control. This war on gold has been going on for almost one hundred years, but it gained traction in the 1960's with the forming of the London Gold Pool. Just like the London Gold Pool failed in 1969, the current manipulation scheme of gold (and silver prices) cannot be maintained for much longer.
Markets have started the week on the back foot, despite a brief rally following a better-than-expected Q4 GDP print in China. Indeed, Asian equities recorded a small pop following the GDP report, but the gains were shortlived as the general negativity on China’s growth trajectory continues to weigh on Asian markets. In terms of the data itself, China’s Q4 GDP (7.7% YoY) was slightly ahead of expectations of 7.6% but it was slower than Q3’s 7.8%. DB’s China economist Jun Ma maintains his view that economic growth will likely accelerate in 2014 on stronger external demand and the benefits from deregulation. The slight slowdown was also evident in China’s December industrial production (9.7% YoY vs 10% previous), fixed asset investment (19.6% YoY vs 19.9% previous) and retail sales (13.6% vs 13.7% previous) data which were all released overnight. Gains in Chinese growth assets were quickly pared and as we type the Shanghai Composite (-0.8%), HSCEI (-1.1%) and AUDUSD (-0.1%) are all trading weaker on the day. On a more positive note, the stocks of mining companies BHP (+0.29%) and Rio Tinto (+0.26%) are trading flat to slightly firmer and LME copper is up 0.1%. Across the region, equities are generally trading lower paced by the Nikkei (-0.5%) and the Hang Seng (-0.7%). Staying in China, the 7 day repo rate is another 50bp higher to a three month high of 9.0% with many investors continuing to focus on the Chinese shadow banking system following the looming restructuring of a $500m trust product that was sold to ICBC’s customers.
Weak results from Intel, American Express and Capital One, not to mention Goldman and Citi? No problem: there's is overnight USDJPY levitation for that, which has pushed S&P futures firmly into the green after early overnight weakness: because while the components of the market may have such trivial indicators as multiples and earnings, the USDJPY to which the Emini is tethered has unlimited upside. And now that the market is back into "good news is good, bad news is better" mode, today's avalanche of macro data which includes December housing starts and building permits, industrial production, UofMichigan consumer confidence and JOLTs job openings, not to mention the up to $3 billion POMO, should make sure the week closes off in style: after all can't have the tapped out consumer enter the weekend looking at a red number on their E-trade account: they might just not spend as much (money they don't have).