Nomura

Citi On Why Negative Rates Are Like Potato Chips: "No One Can Have Just One"

"Experience in other countries that have entered into this territory should sober you up on the likely economic and inflation impact. No country that has gone into negative rates has experienced major shifts in its growth and inflation profile – minor, yes; major, no. As a consequence every dip into negative rates has been followed by additional moves."

BoJ Adopts Negative Interest Rates, Fails To Increase QE

Well that did not last long. After initial exuberance over The BoJ's wishy-washy decision to adopt a 3-tiered rate policy including NIRP, markets have realized that without further asset purchases (which were maintained at the current pace), there is no ammo to lift stocks. An almost 200 point surge in Dow futures has been erased and Nikkei 225 has dropped 1000 points from its post BOJ highs... as 10Y JGB yields hit record lows at 11bps and 20Y JGB yields drop to 82bps - the lowest since 2003

 

Equity Futures Rise After Oil Rebounds From 12 Year Lows; US Markets Closed

With the US closed today for Martin Luther King Holiday, global risk tone has once again been set entirely by oil, which opened sharply lower at fresh 12 year lows on fears of an Iran oil glut, but has steadily rebounded on the latest OPEC comments, and at last check both WTI and Brent were unchanged trading in the low $29's on muted volume. With Asian markets mixed, European shares swung between gains and losses, while the yen weakened as China stepped up efforts to curb foreign speculation against its currency. Crude oil rose from a 12-year low after the Organization of Petroleum Exporting Countries forecast a decline in supplies from rival producers.

Bob Janjuah Warns The Bubble Implosion Can't Be "Fixed" This Time

Having correctly foreseen in September that "China's devaluations are not over yet" it appears Nomura's infamous 'bear' Bob Janjuah has also nailed The Fed's subsequent actions (hiking rates into a fundamentally weakening economy in a desperate bid to "convince markets that strong growth and inflation are on their way back"). In light of this, his latest note today should be worrisome to many as he warns the S&P 500 will trade down around 20% to 25% from current levels in H1, down to the 1500s and for dip-buyers, it's over: "I now feel even more certain that debt-driven asset bubble implosions cannot merely be 'fixed' with even more debt and another round of central bank-driven asset bubbles."

Copper Futures Crash Below $2 For First Time Since 2009

Dr. Copper is sick. For the first time since May 2009, Copper futures prices traded with a $1 handle this morning ($1.99) as Nomura analysts warn the commodity is likely to see more downside risk over the medium term as the market is expected to remain in surplus through the end of the decade.

The Russian Economy Is Cracking, "Social Unrest" Coming In "A Few Months", Official Warns

As the ruble plunges to record lows against the dollar, we take a close look at the outlook for inflation and GDP growth in 2016 in the context of The Kremlin's budget, which assumes $50/bbl crude. We also ask whether the deficit - expected to balloon to 4.4% of GDP in the event oil hovers around $35/bbl - will grow as a result of a planned bailout for insolvent state lender VEB. 

Azerbaijan Currency Crashes 50% As Crude Contagion Spreads

OPEC blowback continues to ripple around the world. With Russia's Ruble pushing back towards record lows against the USD, and Kazakhstan's Tenge having tumbled to record lows, the writing was on the wall for Azerbaijan. As Bloomberg reports, the third-biggest oil producer in the former Soviet Union moved to a free float on Monday and the manat crashed almost 50% instantly to its weakest on record with the second devaluation this year.

Futures Jump After Friday Drubbing, Despite Brent Sliding To Fresh 11 Year Lows, Spanish Political Uncertainty

In a weekend of very little macro newsflow facilitated by the release of the latest Star Wars sequel, the biggest political and economic event was the Spanish general election which confirmed the end of the PP-PSOE political duopoly at national level.  As a result, there was some early underperformance in SPGBs and initial equity weakness across European stocks, which however was promptly offset and at last check the Stoxx 600 was up 0.4% to 363, with US equity futures up nearly 1% after Friday's oversold drubbing. In other key news, the commodity slide continues with Brent Oil dropping to a fresh 11-year low as futures fell as much as 2.2% in London after a 2.8% drop last week.

How Traders Are Preparing For The Rate Hike: "It's A Good Time To Beat The Crap Out Of A Punchbag"

Summing up the anxiety ahead of today's Fed decision - which talking heads just this morning explained is "priced in" and is a "non-event... been so telegraphed" - market professionals believe "it seems a good time just to go and beat the crap out of a punchbag." As Bloomberg reports, real traders say they "just don't want to do any damage today," as they trade around the events, "I think we're going to see a lot of volatility," and Treasury risk is already spiking to 5-month highs.

Frontrunning: December 8

  • Anti-Trump Effort Launches Super PAC (WSJ)
  • Muslims decry Trump's proposal to keep them out of US (AP)
  • Debate Heats Up Over No-Fly List, Gun Sales (WSJ)
  • OPEC Takes Down Oil Majors as Lower-for-Even-Longer Kicks In (BBG)
  • Chinese Companies Are Trapped in IPO Logjam (WSJ)
  • Republican Ted Cruz vaults into first place in new Iowa poll (Reuters)