At the end of the day, it was all about the dollar and the reason for this morning's stock surge around the globe, as we noted last night, is absurdly delightful: Yellen signaled "weakening world growth" and "less confidence in the renormalization process." In other words, the "bad news is good news" mantra is back front and center.
With Europe back from Easter break, we are seeing a modest continuation of the dollar strength witnessed every day last week, which in turn is pressuring oil and the commodity complex, and leading to some selling in US equity futures (down 0.2% to 2024) ahead of today's main event which is Janet Yellen's speech as the Economic Club of New York at 12:20pm, an event which judging by risk assets so far is expected to be far more hawkish than dovish: after all the S&P 500 is north of 2,000 for now.
With European markets closed across the continent on Monday as the Easter holiday continues, overnight Asia was busy with China Shanghai Composite letting off some steam, and closing down 0.7% at session lows on concerns the Shanghai and Shenzhen home bubble have been popped by the politburo, Japan was a different story with the Yen sliding following a report by the Sankei newspaper that Abe will announce in May his intention to delay the planned levy hike, coupled with additional reports that Japan will unveil a major fiscal stimulus (and just on Friday Abe said he is "not thinking at all about supplemental budget" at this time).
With April wrapping up the seasonally strong period of the year, the seasonal adjustment boost to economic data coming to an end, and earnings growth remaining elusive – the summer months could prove to be problematic.
With all of Europe and the U.S. closed for holiday, what little market action there was overnight came out of Asia, where China once again was engaged in its last hour "National Team" market manipulation, which saved the SHCOMP from a red close after the now traditional last hour buying spree pushed the Shanghai Composite from red on the session an hour before close to near the highs of the day.
"One of the curious things over the last few years, is that despite the last two bubbles in markets being mainly US centred (dot com bubble and US housing) it has been the Japan based Nikkei that has peaked 3 to 6 months before the S&P 500. The Nikkei peaked in March of 2000, while the S&P 500 rolled lower in August of that year. The Nikkei peaked in June of 2007, while the S&P 500 peaked in October of that year."
Following yesterday's dollar spike which, which topped the longest rally in the greenback in one month, the prevailing trade overnight has been more of the same, and in the last session of this holiday shortened week we have seen the USD rise for the fifth consecutive day on concerns the suddenly hawkish Fed (at least as long as the S&P is above 2000) may hike sooner than expected, which in turn has pressured WTI below $39 earlier in the session, and leading to weakness across virtually all global risk assets.
It’s sad that “we the people” continue to allow deranged captured academics, under the complete command of the banking cabal, to control the destiny of our country. They have failed for 103 years, but we continue to bow down to these central bankers as if they knew what they were doing. They do know how to debase the currency, obfuscate true inflation, prop up financial markets through monetary manipulation, and generate prodigious amounts of propaganda and misinformation to coverup their true purposes. The people will sit idly by until these deranged rats destroy the world.
The story on Wall Street and CNBC continues to be that we’re in a correction and this is a buying opportunity. Even Warren Buffett joins the chorus of stock market cheerleaders for the skeptical public. Well, I agree with the skeptical public, not the experts here!
Following two days of rangebound moves, where Monday's modest market rebound was undone by the Tuesday just as modest decline (despite the early surge higher on the latest "bullish for stocks" European terrorism), overnight equity action continued to be more of the same, and as of this moment S&P 500 futures were unchanged, while European stocks were modestly higher. But while equities remain surprisingly uneventful despite loud warnings by both JPM and Goldman now that another bout of volatility and equity downside is coming, in FX there has been a substantial change, one which has seen the US dollar rise for a fourth day, the longest winning streak in a month, driven by the latest round of hawkish Fed jawboning courtesy of the Chicago Fed's Charlie Evens yesterday, which in turn has pushed down prices of oil, gold and copper.
This morning's Brussels suicide attacks have led to risk-off sentiment across European asset classes, with Bunds higher and equities firmly in the red, although if the Paris terrorist attacks of November are any indication, today's tragic events may be just the catalyst the S&P500 needs to surge back to all time highs. FX markets have also been dominated by events in Brussels, with USD and JPY strengthening, while EUR and GBP softening throughout the European morning.
At the same time as the PBOC was cautioning about the dangers of excess debt (just as it injected a record amount of loans into the financial system), China's central bank warned about dangers from a stock market bubble, and perhaps just to assure the bubble gets even bigger, at the same time China eased on margin debt limits, in the process sending Chinese stocks soaring higher by 2.2%, and pushing the Shanghai Composite over 3000 for the first time in months as China now appears set to attempt another housing bubble "soft landing" while at the same time restarting its housing bubble.
It may be option expiration day (always leading to abnormal market activity) but it remains all about the weak dollar, which after crashing in the two days after the Fed's surprisingly dovish statement has put both the ECB and the BOJ in the very awkward position that shortly after both banks have drastically eased, the Euro and the Yen are now trading stronger relative to the dollar versus prior. As DB puts it, "the US Dollar has tumbled in a fairly impressive fashion since the FOMC on Wednesday with the Dollar spot index now down the most over a two-day period since 2009" which naturally hurts those countries who have been rushing to debase their own currencies against the USD.
Nikkei futures rallied post-Fed into the Japaense open (despite weakness in USDJPY) and then when trade data struck (and exposed the utter failure of competitive devaluation), everything went into freefall. The Nikkei crashed 700 points and USDJPY plunged to its lowest since QQE2... and then - on cue - "someone" started panic selling JPY...
In the aftermath of the Fed's surprising dovish announcement, overnight there has been a rather sudden repricing of risk, which has seen European stocks and US equity futures stumble to roughly where they were when the Fed unveiled its dovish surprise, while the dollar collapse has continued, sparking deflationary fears resulting in treasury yields plunging even as gold soars, all hinting at another Fed policy error. So was that it for the Fed's latest intervention "halflife"? We don't know, but we expect much confusion today over whether even the Fed has now run out of dovish ammunition.