- Ukraine Says Russia Exporting ‘Terror’ Amid Eastern Push (BBG)
- Civil War Threat in Ukraine (Reuters)
- China Shoe Plant Strike Disrupts Output at Nike, Adidas Supplier (BBG)
- Mt Gox to liquidate (WSJ)
- Ex-Co-Op Bank Chairman Charged With Cocaine Possession (BBG)
- Goldman Sachs plans to jump-start stock-trading business (WSJ)
- Credit Suisse first-quarter profit falls as trading tumbles (Reuters)
- U.K. Unemployment Rate Falls to Five-Year Low (BBG)
- Lawmakers Back High-Frequency Trade Curbs in EU Markets Law (BBG)
- Yahoo's growth anemic as turnaround chugs along (Reuters)
- Spain ETF Grows as Rajoy Attracts Record U.S. Investments (BBG)
We summarized yesterday's both better and worse than expected Chinese GDP data as follows: "a substantial deterioration of the economy, one which was to be expected yet one which can be spun as either bullish thanks to the GDP "beat", and negatively if the purpose is to make a case for more PBOC stimulus." Sure enough here are the headlines that "explain" the latest overnight futures surge which has once again brought the S&P into the green on the year - a 40 point Spoo move in hours since yesterday's bottom when the Nikkei "leaked" Japan's economy is on the ropes :
- Stocks Rise on China Stimulus Speculation
Here one should of course add the comment that launched yesterday's rebound, namely the Japanese warning that its economy is about to contract, adding to calls for more BOJ stimulus, and finally this other Bloomberg headline:
- The Strengthening Case for ECB Easing
And there you have it - goodbye "fundamental" case; welcome back "central banks will once again bail everyone out" case. Hopefully today's news are absolutely abysmal to add "US economic contraction fear renew calls for untapering" to the list of headlines that should send the S&P to all time highs by the end of today.
Moments ago the Nikkei strategically leaked a report that the Japanese cabinet office, quite expectedly, will downgrade its economic assessment in its April report. "Expected" because as we reported, discretionary spending following the sales tax hike, has gotten crushed. Also not unexpected, the USDJPY took the news in stride and posted a modestly bounce in the face of today's relentless selling of the pair. Why? Because to algos and many asset managers desperate for more training wheels from central banks (now that everyone has forgotten how to trade based soely on fundamentals), this means more QE from the BOJ right - after all horrible news for everyone is great news for the 1%.
Not so fast.
One can see that while the traditional 6:00 AM USDJPY buy program is just duying to resume aggressive upward momentum ignition, futures are still leery and confused by the recent post-open high beta selloffs. Then again, things like yesterday's ridiculous no news 3:30pm ramp happen and confused them even more just as momentum is about to take a downward direction. Stocks in Asia (ex-China) advanced amid a reversal in sentiment after Citigroup (+4.15%) inspired positive close on Wall Street, however Shanghai Comp (-1.4%) underperformed as concerns over GDP data on Wednesday following weak money supply data weighed on sentiment. Stocks remained on the back foot (Eurostoxx50 -0.42%), with Bunds supported by the release of lower than expected German ZEW survey and also ongoing concerns surrounding the stand-off between Ukraine/Russia. Short-Sterling bear steepened after UK CPI fell to its lowest level since October 2009, but house prices across Britain posted its biggest rise since June 2010, reviving concerns over an overheating market.
Futures are treading water once more now that Ukraine has stormed to center stage from the backburner after everyone was convinced Putin would let the situation cool off after annexing Crimea. Guess not. Adding the renewed geopolitical jitters to what has already been a beta stock bloodbath into a holiday shortened week assures some high volatility fireworks. Cautious sentiment was observed over in Asia (Nikkei 225 -0.36%) amid renewed fears that geopolitical tensions in Ukraine will flare up again following reports of exchange gunfire with pro-Russian militants. This sentiment carried over into the European session with stocks lower across the board (Eurostoxx50 -0.71%). EUR is lower after ECB’s Draghi said any further strengthening of the EUR would warrant further action by the ECB, including non-standard measures such as quantitative easing - it is amazing how frequently and often the Virtu algos still fall for Draghi's jawboning trick which has now become all too clear will never be implemented and certainly not if he keeps talking about it daily, as he does.
Ukraine Mobilizes Military, Gives Separatists Ultimatum; Russia Slams Escalation As "Criminal", Yanukovich Warns Of Civil WarSubmitted by Tyler Durden on 04/13/2014 21:29 -0400
If Russia's intention was to give Ukraine enough "escalation" rope with which to hang itself once again, it may have succeeded when a little over an hour ago acting president Oleksander Turchinov said in a televized address that Ukraine has mobilized its armed forces to launch a "full-scale anti-terrorist operation" against pro-Russian separatists. Furthermore, knowing the only real escalation Kiev can engage in is in the war of words department, Ukraine set an 0600 GMT Monday deadline for pro-Russian separatists to give up their weapons and leave buildings they have occupied in the east of the country, a presidential decree said. It is unclear if this would be the catalyst to launch the military operation, but should Kiev indeed bring in the army it is certainly clear that Russia will respond in kind.
Head Of Asia's Largest Clothing Retailer: "I Don’t Have An Optimistic View About Consumption In Japan"Submitted by Tyler Durden on 04/11/2014 14:43 -0400
Today we get some more on the ground perspective on the abysmal (second) reign of Abe, where the stock market may be approaching bear market territory (after everyone was convinced the Nikkei was set to soar in 2014), but it is really the economy which is about to get it, most likely resulting in Abe's second premature evacuation stage left (with the now traditional Imodium scapegoat) well before the work of Abenomics is completed, in the process sending the USDJPY once again back into double digit territory. The bottom line: “I don’t have an optimistic view about consumption in Japan,” Yanai told reporters yesterday in Tokyo. He said he had yet to see an effect on sales from the tax increase. He will quite soon, and he won't be happy with what he sees.
The market is facing an increasingly negative environment. Historically speaking April and May have not been big months for crises, but the number of negatives the market is facing today is rather unique.
After a selloff as violent as that of last night, usually the overnight liftathon crew does a great job of recovering a substantial portion of the losses. Not this time, which coupled with the sudden and quite furious breakdown on market structure, leads us to believe that something has changed rather dramatically if preserving investor confidence is not the paramount issue on the mind of the NY Fed trading desk. Nikkei 225 (-2.38%) suffered its worst week since March'11 amid broad based risk off sentiment following on from a lower close on Wall St. where the Nasdaq Biotech index suffered its largest intra-day decline since August 2011. Negative sentiment carried over into European session, with stocks lower across the board (Eurostoxx50 -1.17%) and tech under performing in a continuation of the recent sector weakness seen in the US. JP Morgan (JPM) due to report earnings at 7:00AM EDT and Wells Fargo (WFC) at 8:00Am EDT.
The Nikkei 225 is down over 700 points from the post-FOMC minutes exuberance with major volume hitting the open in Japan. Japanese stocks are now down 15% from their high and trading at six-month lows (and the cheapest to the Dow in 15 months). USDJPY is tumbling further (though the standard opening knee-jerk stop-run is being attempted). Within the broader Topix index, Japanese bank stocks have just hit a bear market (down over 20% from their highs) at 10-months. When asked how he felt about this, we suspect Abe said "depends."
But the pretty people on TV said the Fed Minutes proved they were the most dovish ever and initial claims hit recovery lows... What a total disaster - Equity markets peaked within a few minutes of the open and never looked back - yesterday's "Fed Cat Bounce" gave way to Really Red Thursday... with the Nasdaq and Russell 6.5% from their recent highs (and the S&P 3.5% off), we suspect a "markets in turmoil" special on business media any moment...
The main overnight event, which we commented on previously, was China's trade data which was a disaster. March numbers turned out to be well below market consensus with exports falling 6.6% YoY (vs +4.8% expected) and imports falling 11.3% YoY (vs +3.9% expected). The underperformance of imports caused the trade balance to spike to $7.7bn (vs -$23bn in Feb). Pricing on the Greek 5-year syndicated bond is due later today, with the final size of the bond boosted to EUR 3bln from EUR 2.5bln as order books exceed EUR 20bln (equating to a rough bid/cover ratio of over 6) as the final yield is set at 4.75% (well below the 5.3% finance ministry target and well above our "the world is a bunch of idiots managing other people's money" 3% target). Ireland sold EUR 1bln in 10y bonds, marking the third successful return to the bond market since the bailout. Also of note, this morning saw the release of lower than expected French CPI data, underpinning fears of potential deflation in the Eurozone.
All the gains that Japan's Nikkei 225 futures had achieved in the post-FOMC-Minutes exuberance have been lost as first Japan (huge miss in machine orders) and then China (huge miss in imports and exports) hit the market with a disappointing data double whammy. US futures are relatively untouched for now (even as USDJPY tumbles back below 102). Asian equity markets are mixed (China/India down notably and Japan fading fast) as another Chinese bank has "delayed payment" on a bond. Copper prices have also reverted and given up post-FOMC gains (despite rumors of PBOC bailout buying).
On April 1, as was widely known, Japan raised its sales tax from 5% to 8% - a move many dread could unleash a recession as happened the last time Japan hiked a consumption tax in 1997. A week later the verdict on just how much consumption was frontloaded ahead of the hike is in, as we get the first sales data on the ground. The result is, in short, a disaster: overnight the Nikkei reported that Japanese department store Takashimaya’s revenue in April 1-7 period crashed 25%!
The positive sentiment stemming from a positive close on Wall Street and saw Shanghai Comp (+0.33%), Hang Seng (+1.09%) trade higher, failed to support the Nikkei 225 (-2.10%), which underperformed its peers and finished in the red amid JPY strength as BoJ's Kuroda failed to hint on more easing. Stocks in Europe (Eurostoxx50 +0.32%) traded higher since the open, with Bunds also under pressure amid the reversal in sentiment.
Alcoa kicked off earnings season yesterday, with shares up 3% in after-market hours. Focus now turns to the release of the FOMC meeting minutes.