• 09/21/2014 - 14:52
    Dear Janet; If I may be so forward, as a concerned citizen of the Constitutional Republic of the United States, it is with great consternation that I feel compelled to write you this distressing...

POMO

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Exponential: Ebola Cases Now Double Every 3 Weeks; CDC Warns As Many As Half A Million May Be Infected Soon





Since the start of the outbreak, the Ebola virus has infected 5,357 people, killing 2,630, according to the WHO; and as The UN explains, the outbreak is the largest the world has ever seen with the number of cases is doubling every three weeks. As Sierra Leone instigates a 3-day nationwide shutdown to contain the deadly virus, the UN Secretary-General explains "Ebola matters to us all," as we noted previously the odds of the infection coming to America is around 18% by year-end. The CDC, however, hot on the heels of the UN's proclamation that "the gravity and scale of the situation now require an unprecedented level of international action," has warned that unless government intervention is increased significantly, 550,000 people could be infected by the end of January. "Contained?"

 
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China Stocks Tumble Most In Six Months; US Futures Lower As Key Risk Events Loom





If over the weekend we got some terrible economic news out of China, then overnight it was turn for a major disappointment in capital flows, when Chinese Foreign Direct Investment in August crashed by 14%, far below the 0.8% increase expected, attracting just $7.2 billion in FDI, and the lowest in four years. This once again sparked fears of a Chinese hard landing and sent the Shanghai Composite tumbling 1.82%, the biggest drop in six months. In addition to China, there was the German ZEW Survey, which while beating expectations of a 5.0 print, dropped from 8.6 to 6.9 in August, the lowest since 2012. In fact, the gauge has decreased every month since December when it reached a seven-year high. And while there is not much other news today ahead of the blitz assault of data later in the week, including the Fed tomorrow, the TLTRO announcement on Thursday and the Scottish referendum results and the BABA IPO on Friday, we are stunned futures aren't as usual, soaring.

 
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US Equity Futures Unable To Rally Despite Avalanche Of Bad Global News





Something appears to have changed not only because the USDJPY is not some 100 pips higher overnight on, well, nothing but because the S&P, which is treading water, has yet to spike on no volume reasons unknown. That something may be algos which are too confused to buy ahead of this week's Fed announcement which may or may not have some notable changes in language or the Scottish referendum on the 18th. Or it could simply be that algos are no longer allowed to openly manipulate and rig the market on the CME as of today now that "disruptive market practices" are banned (why weren't they before)? In any case, keep a close eye on the market today: not all is at it has been for a while, unless of course it is still just a little early and the rigging algos (which haven't gotten the Rule 575 memo of course) haven't woken up just yet.

 
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Markets Digest Wristwatch, NIRP Monetization, Catalan Independence News; Push Yields, USDJPY Even Higher





Overnight the most notable move has been the ongoing weakness in rates, with USTs reversing earlier Tokyo gains after BoJ Deputy Governor Iwata, in addition to commenting on a lot of things that didn't make much sense,  said he didn’t see any difficulties in money market operations even if BoJ bought bought government debt with negative yields, as InTouch Capital Markets notes. As a reminder, yesterday we noted that in a historic first the "Bank Of Japan Monetizes Debt At Negative Rates." As Bloomberg notes, this may be interpreted that BoJ may target negative yields to penalize savers, which "all boosts the appeal of yen-funded carry trades." In other words, first Europe goes NIRP, now it's Japan's turn! So while this certainly lit the fire under the USDJPY some more, which overnight broke about 106.50 and hit as high as 106.75 on Iwata's comments, it does not explain why the 10Y is currently trading 2.52% - after all the fungible BOJ money will eventually make its way into US bonds and merely add to what JPM has calculated is a total $5 trillion in excess liquidity sloshing in the global market.

 
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The Buyback Party Is Indeed Over: Stock Repurchases Tumble In The Second Quarter





We have now done the math and compiled the Q2 earnings for the S&P 500 and we can indeed confirm that (at least in the second quarter) the buyback part is not only over but has ended with a thud, with the total notional amount of buybacks completed in Q2 plunging by 27% in Q2 to "only" $117 billion - the lowest since Q1 of 2013!

 
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"Unrigged" Close Buying-Panic Saves S&P 2,000 For Long Weekend





For the 6th week of the last 8, Treasury yields declined with 30Y pressing to 3.05% (and 10Y 2.32%) handles to 15-month lows. US equity markets saw volume crater as the early high-stops were run in the EU session and low-stops run in the US session before the ubiquitous EU close ramp lifted futures to VWAP and S&P cash to 2000.xx where it stayed for the rest of the day in a wholly unrigged way. Trannies ended the week red and Russell the best. The USD Index closed at 13-month highs (up 7 weeks in a row). Despite USD strength, gold and silver rose 0.5% on the week but oil was the big winner +2.4% (testing $96) as copper tumbled 2%. Credit markets closed at their wides (as stocks closed at their highs). Interestingly, once the Sept POMO schedule was released, TSYs sold off on the day to close red (but end 4-7bps lower on the week). VIX closed unch today but the ridiculous late-day panic-buying spree in futures grabbed stocks back above the crucial 2000 level for the S&P. Year-to-date, Treasuries lead +16.75% as the S&P (+8.5%) overtook gold (+6.7%) in the last few days.

 
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Fed Unveils Only 11 Days Of POMO In September For A Mere $15 Billion





As they say in England, we appear to be getting to the vinegar strokes of the Fed's buying efforts. As expected, the NYFed announced its Permanent Open Market Operations (POMO) schedule for September which covers just 11 days (including no Fridays at all) summing to a mere $15bn of Treasuries planned to be purchased... (with only 5 days in size).

 
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Ebola Devastates West Africa: Revenues Down; Markets Not Functioning; Projects Canceled; GDP Plunges 4%





The market, in its infinitely rigged wisdom, has concluded that the worst Ebola outbreak in history is a non-event, even though it has put virtually all of western Africa on indefinite lockdown, and as Reuters reports, is "causing enormous damage to West African economies and  draining budgetary resources." In fact the damage from Ebola to Africa is already so acute, it is expected that economic growth in the region will plunge by up to 4 percent as foreign businessmen leave and projects are canceled, according to the African Development Bank president said. Revenues are down, foreign exchange levels are down, markets are not functioning, airlines are not coming in, projects are being canceled, business people have left - that is very, very damaging," African Development Bank (AfDB) chief Donald Kaberuka said in an interview late on Tuesday.

 
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The S&P 500 Through The Ages - From 200 To 2000 In 30 Years





The S&P 500 has tripled off the March 2009 lows and took a mere 65 days to go from 1900 to 2000 today. As WSJ notes, the S&P needed 11,208 trading days to reach 100 for the first time... Here’s a look at S&P 500 milestones throughout the decades... and how Bernanke predicted 2,000 in March 2013.

 
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De-Escalation Algo Pushes Futures To Overnight Highs





It is unclear exactly why stock futures, bonds - with European peripheral yields hitting new record lows for the second day in a row - gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the "de-escalation" algo as a meeting between Russia and Ukraine begins today in Belarus' capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn't say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).

 
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S&P 500 To Rise Above 2000 On Hopes Euro Collapse Accelerates, Euro Yields Hit New Records





It's been one of those days. First, the CME broke for 4 hours due to what some suggested were HFT connectivity issues, then Russia announced it would send a second humanitarian convoy into Ukraine (a big risk off move the first time it was announced, now not even an algo stirred), then Germany reported that the IFO Business Confidence/Climate dropped for the fourth consecutive month to 106.3 from 108.0, below the 107.0 expected, with the IFO chief economist stating that German GDP expectations are likely to be cut to 1.5% from 2.0% later in the year, and finally the French government collapsed due to disagreement over policy between finance minister Valls and economy minister Montebourg. All in all, a typical day in Europe's slow-motion implosion. So why are Spanish and Italian bank stocks soaring and European bond yields reaching new record highs? Simple: following Draghi's speech on Friday at Jackson Hole, which at initial read was hardly as dovish as many had expected, the FT and various other media outlets promptly changed the narrative and made it seem as if the ECB head was about to unleash QE.

 
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Futures Levitate To Fresh Record Highs On Just Right Mix Of Bad News





With the FOMC Minutes in the books, the only remaining major event for the week is the Jackson Hole conference, where Yellen is now expected to talk back any Hawkish aftertaste left from the Minutes, and which starts today but no speeches are due until tomorrow. And while the Minutes were generally seen as hawkish, stocks continue to levitate, blissfully oblivious what tighter monetary conditions would mean to an asset bubble, which according to many, is now the biggest in history. And speaking of equities, US futures climbed to a fresh record high overnight on just the right mix of bad news.

 
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Risk On After Ukraine's "Convoy Shelling" Hoax Forgotten





Friday's main event, Ukraine's alleged attack of a Russian military convoy, has come and gone, and as we mused on Friday has promptly faded into the memory of all other fabricated headlines released by the country engaged in a major civil war and an even more major disinformation war. To be sure, Germany's DAX has recovered virtually all losses, US futures are up about 9 points, and the 10 Year is back to 2.37%. One wonders what algo-slamming headline amusement Ukraine has in stock for us today, although anyone hoping for a quick "de-escalation" (there's that word again) will have to wait following yesterday's meeting of Russian, Ukraine, German and French ministers in Berlin where Russia's Lavrov said he saw no progress on Ukraine cease-fire, Foreign Minister Sergei Lavrov says in Berlin, adding that a cease-fire should be unconditional.

 
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Enough Bad News Overnight To Send Futures Higher On Turbo Tuesday





If the global equity "markets" were in need of a sharp "horrible news is great news" boost overnight, it came courtesy of Germany's ZEW investor confidence survey, which printed at a stunning 8.6, a plunge from the 27.1 in July and far below the 17.0 expected - the lowest print since December 2012 -largely suggesting that a European triple-dip is all but assured. And if that wasn't enough, strong language from John Kerry, assured to fan the flames of geopolitical instability, came hours ago when the US SecState said even more Russian sanctions may be coming. And just to make sure the NY Fed trading desk has to come up with a new narrative is the latest development in the Russian "humanitarian convoy" saga, which as we reported last night, has departed Russia but which Ukraine is now refusing to allow into its country. All in all, it's is setting up to be another super bullish day in the rigged markets for which all that matters is... Tuesday.

 
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Futures Higher On Geopolitical Tensions Which Are Either Easing Or Looming





Since there is nothing on today's data docket, it will be all about, you guessed it, geopolitical risks, where "consensus" is best summarized by these two Bloomberg headlines:

  • Stay USD Long as Geopolitical Risks Loom
  • USD is mixed and world stock markets rise as concerns over geopolitical risks ease

That pretty much covers it, although in addition to the Ukraine civil war one can now add an Iraq coup to the list of geopolitical fiascoes instigated by US foreign policy.

 
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