RBS

Hungover Markets Enter November With Quiet Overnight Session

After a blistering October for stocks, drunk on yet another month of record liquidity by the cental planners, November's first overnight trading session has been quiet so far, with the highlight being the release of both official and HSBC China PMI data. The official manufacturing PMI rose to 51.4 in October from 51.1 in September. It managed to beat expectations of 51.2 and was also the highest reading in 18 months - since April 2012. October’s PMIs are historically lower than those for September, so the MoM uptick is considered a bit more impressive. The uptrend in October was also confirmed by the final HSBC manufacturing PMI which printed at 50.9 which is higher than the preliminary reading of 50.7 and September’s reading of 50.9. The Chinese data has helped put a floor on Asian equities overnight and S&P 500 futures are nudging higher (+0.15%). The key laggard are Japanese equities where the TOPIX (-1.1%) is weaker pressured by a number of industrials, ahead of a three day weekend. Electronics-maker Sony is down 12% after surprising the market with a profit downgrade with this impacting sentiment in Japanese equities.

Frontrunning: October 30

  • Morning Humor from Hilsenrath - Fed Balance Sheet Not Seen Returning to Normal Until at Least 2019 (WSJ)
  • Health Policies Canceled in Latest Hurdle for Obamacare (BBG)
  • Was there anything RBS was not manipulating? RBS Said to Review Currency-Trading Practices Amid Probe (BBG)
  • Sebelius to Testify Before House Panel (WSJ)
  • And more humor: Spain's Statistics Institute Confirms End of Recession (WSJ) ... and now we await the triple dip
  • Finally some credible reporting on Yellen's "foresight" - Yellen feared housing bust but did not raise public alarm (Reuters)
  • Japan government moves closer to Fukushima takeover (FT)
  • China to step up own security after new NSA allegations (Reuters)
  • Blackstone Vies With Goldman in Spain Rental Housing Bet (BBG)
  • In new U.S. budget talks, Republican proposal has flipped the script (Reuters)

Despite (Or Thanks To) More Macro Bad News, Overnight Futures Levitate To New All Time Highs

The overnight fireworks out of China's interbank market, which saw a surge in repo and Shibor rates (O/N +78 to 5.23%, 1 Week +64.6 to 5.59%) once more following the lack of a follow through reverse repo as described previously, and once again exposed the rogue gallery of sellside "analysts" as clueless penguins all of whom predicted a quick resumption of Chinese interbank normalcy, did absolutely nothing to make the San Diego's weatherman's forecast of the overnight Fed-driven futures any more difficult: "stocks will be... up. back to you." And so they were, despite as DB puts it, "yesterday saw another round of slightly softer US data that helped drive the S&P 500 and Dow Jones to fresh highs" and "the release of weaker than expected Japanese IP numbers hasn’t dampened sentiment in Japanese equities" or for that matter megacorp Japan Tobacco firing 20% of its workforce - thanks Abenomics. Ah, remember when data mattered? Nevermind - long live and prosper in the New Normal. Heading into US trading, today the markets will be transfixed by the FOMC announcement at 2 pm, which will likely say nothing at all (although there is a chance for a surprise - more shortly), and to a lesser extent the ADP Private Payrolls number, which as many have suggested, that if it prints at 0 or goes negative, 1800 on the S&P is assured as early as today.

October FOMC Week Starts With Traditional Overnight Meltup

Just as it is easy being a weatherman in San Diego ("the weather will be... nice. Back to you"), so the same inductive analysis can be applied to another week of stocks in Bernanke's centrally planned market: "stocks will be... up." Sure enough, as we enter October's last week where the key events will be the conclusion of the S&P earnings season and the October FOMC announcement (not much prop bets on a surprise tapering announcement this time), overnight futures have experienced the latest off the gates, JPY momentum ignition driven melt up.

What Comes After "Bubble": London Home Prices Rise By 10% In One Month; Shanghai Up 12% In One Week

All those who claim there is no inflation, and a tsunami of hot central-bank money flooding the world, are advised to check out the housing numbers reported overnight by UK's property website Rightmove, according to which asking prices in London saw an "unsustainable" 10% month-on-month increase in October. This sent the typical asking prices in the capital to £544,232, a new record high surpassing the previous high set in July by more than £28,000. But if you thought a 10% increase in one month was bad, what is the proper adjective to describe a 12% increase in home prices in... one week!?

Frontrunning: October 21

  • FHFA Is Said to Seek at Least $6 Billion From BofA for MBS Sales (BBG)
  • Record Pact Is on the Table, But J.P. Morgan Faces Fight (WSJ)
  • Magnetar Goes Long Ohio Town While Shorting Its Tax Base (BBG)
  • Mini-Wall Street' Rises in Hamptons (WSJ)
  • Obama to call healthcare website glitches 'unacceptable' as fix sought (Reuters)
  • Starbucks Charges Higher Prices in China, State Media Says (WSJ)
  • Cruz Is Unapologetic as Republicans Criticize Shutdown (BBG)
  • Berlusconi struggles to keep party united after revolt (Reuters)
  • SAC Defections Accelerate as Cohen Approaches Settlement (BBG)

Frontrunning: October 15

  • Spot the pattern: Senate Leaders Nearing a Deal (Politico), Senators say debt, shutdown deal is near (USA Today), Senate Leaders in Striking Distance of a Deal (WSJ), U.S. senators hint at possible fiscal deal on Tuesday (Reuters), Senate Debt-Limit Deal Emerging (BBG)
  • U.S. debt ceiling crisis would start quiet, go downhill fast (Reuters)
  • Uneasy Investors Sell Billions in Treasurys (WSJ)
  • BOE’s Cunliffe Says U.K. Is Not in Grip of Housing-Market Bubble (BBG)
  • Letta Mixes Tax Cut With Rigor in Post-Berlusconi Italian Budget (BBG)
  • Japan Seeks to Export More High-End Food  (WSJ)
  • Burberry names Bailey CEO as Ahrendts quits for Apple (Reuters)
  • China’s Biggest Reserves Jump Since 2011 Shows Inflow (BBG)

Another JPMorganite Busted For "Bandits' Club" Market Manipulation

A few days ago many were shocked when JPM disclosed for the first time that in less than four years, or since 2010, Jamie Dimon's den of alleged criminals has reserved a mindblowing $28 billion toward legal expenses.  In light of recent developments, investors may just want to round that number to a good, clean $30 billion, because as the WSJ just revealed, yet another JPMorgan market manipulator has emerged in a seemingly endless line of people whose shortcut to success at 270 Park Avenue has been to manipulate assorted markets, be it Libor, Credit Derivatives, Electricity, Aluminum, or Equities. We can now add FX to that, following news that one Richard "Dick" Usher, until 2010 at RBS, and since then JPM's London-based head of G10 spot trading, has been implicated in the infamous RBS FX London closing fax manipulation "chat sessions."

Frontrunning: October 9

  • Janet Yellen, a Backer of Pushing the Fed's Policy Boundaries (WSJ)
  • Jos. A. Bank proposes to buy Men's Wearhouse for $2.3 billion (Reuters)
  • J.P. Morgan to Cull Business Clients (WSJ)
  • RBS Said to Pass Currency Trader Chats to FCA Amid Probe (BBG)
  • Prosecutors give SAC settlement ultimatum (FT)
  • U.S. builders hoard mineral rights under new homes (Reuters)
  • Bill Comes Due for Brazil's Middle Class (WSJ)
  • US expected to slash aid to Egyptian government (AP)
  • Samsung launches world's first smartphone with curved screen (Reuters)
  • Microsoft’s $7.2 Billion Nokia Bet Not Luring Apps (BBG)
  • China raises hurdles for foreign banks (FT)

Stunning Libor Fraud Admissions: "As For Kick Backs We Can Discuss That At Lunch" And Much More

  • Derivatives Broker 1: Make 6m go lower! They r going up. [Senior yen trader] will buy you a ferrari next yr if you move 3m up and no change 6m (February 29, 2008, via text message to personal mobile phone)
  • Yen Desk Head: Lord Baliff, I would suggest a lunch over golden week. Monday or Tuesday if you are around. *** As for kick backs etc we can discuss that at lunch and I will speak to [Senior Yen Trader] about it next time he comes up for a chat.

Futures Tumble On Pre-War Jitters, Emerging Market Rout, More Summers Rumors

Overnight the emerging market rout continued, with the India Sensex down another 3.18%, the Philippines tumbling 4%, Jakarta down 3.7% and Dubai crashing 7%. A driving factor continues to be the fear over an imminent air campaign launched at Syria, leading both WTI and Brent higher by 1%, and gold finally breaking out above the $1400 tractor beam, and printing at $1412 at last check, a hair away from a 20% bull market from the lows. In other news, the market is once again "surprised" to learn that Summers, who as we have been showing for over three weeks is the frontrunner for the Fed chair, is the frontrunner for the Fed chair according to CNBC. Of course, there is nothing preventing this from being the latest trial balloon (and nothing that suggest Summers will actually be hawkish as conventional wisdom seems to think: the guy basically works for the financial sector) but futures aren't waiting to find out, and US traders are walking in this morning to a red screen with ES down just over 10 point and sliding. Any minute now the great unrotation from stocks into bonds (10 Year was 2.77% at last check) is about to be unleashed. And if Obama actually goes to war (without talking to Congress of course), watch the bottom fall from the market.

Frontrunning: August 19

  • Egypt, U.S. on Collision Course (WSJ), Gunmen kill 24 Egyptian police in Sinai ambush (Reuters)
  • India’s efforts fail to prevent new rupee low (FT)
  • More bad news for AAPL: Steve Jobs Biopic Crashes on Opening Weekend (WSJ)
  • "Sustainable" - U.S. Stocks Beat BRICs by Most Ever Amid Market Flight (BBG)
  • Merkel cancels election rally after hostage taking (Reuters)
  • Some day, Abenomics might work... Not today though: Japan Exports Rise Most Since ’10 as Deficit Swells (BBG)
  • China July Home Prices Rise as Nation Seeks Long-Term Policy (BBG)
  • Spanish Bank’s Bad Loan Ratio Rises to Record in June (Reuters)
  • Recovery... for some - Ferrari NART Spyder Sets $27.5 Million Auction Record (BBG)
  • Bund yields hit 17-month high, rupee slumps (Reuters)
  • Regulatory Headaches Worsen for J.P. Morgan (WSJ)

Equity Futures Slide More On Resignation Taper Is Just Around The Corner

Despite an overnight surge in the Chinese markets, with the Shanghai Composite closing up 2.4% following reports that China will not only continue with its "liquidity tightening" operation by, paradoxically, cutting RRR for smaller banks, but launch a stimulus for several Chinese provinces and city governments "on the quiet" in the form of jumbo-sized bank loans, and GDP news in Japan that were so bad they were almost good (although not bad enough to close the Nikkei in the green) US futures continue to take on water following the second worst week of 2013 as the market now appears resigned to a Taper announcement in just over 5 weeks (as we have claimed since May). News in Europe continues to be bipolar, with the big picture confirming that only dark skies lie ahead following yesterday's news that a new Greek bailout is just around the corner, or rather just after the Merkel reelection (even though Kotthaus perpetuated the lies and said a second cut in Greek debt is not on the agenda - although maybe he is not lying: maybe only Greek deposits will be cut this time), offset by on the margin improvements in the economic headlines, even as credit creation remains not only non-existent but as the FT reports (one year after Zero Hedge), some €3.2 trillion in financial deleveraging is still on deck meaning an unprecedented contraction in all credit-driven aggregates (one of which of course is GDP).

Eurozone Funding Shortfall Rises To Over $4 Trillion, Increases By More Than $500 Billion In A Year

Back in April 2012, Zero Hedge pointed out something rather disturbing for the European banking sector and defenders of the European monetary myth: the "aggregate shortfall of required stable funding Is €2.78 trillion" which was the number estimated by the BIS' Basel III rules needed to return to some semblance of balance sheet stability in Europe. More importantly, this was a number so big, it was obvious that there was only one way to deal with it: cover it up deeply under the rug and pray it never reemerged. What happened next was inevitable: Basel III's implementation was delayed as there was no way Europe's banks could satisfy their deleveraging requirements, while the actual capital shortfall hole became bigger and bigger. Today, 16 months later, the FT discovers what Zero Hedge readers knew long ago in "Eurozone banks need to shed €3.2tn in assets to meet Basel III." In other words, not only has Europe not fixed anything in the past year, but the liquidity tsunami injected by the central banks merely taped over the epic capital shortfall that just got epic-er, increasing from €2.8 trillion to €3.2 trillion, an increase of half a trillion to over $4 trillion in one short year.

Guest Post: Still Waiting

We do not inhabit a “normal” economy. We live in a financialised world in which our banks cannot be trusted, our politicians cannot be trusted, our money cannot be trusted, and – not least thanks to ongoing spasms of QE and expectations of much more of the same – our markets cannot be trusted. At some point (though the timing is impossible to predict), asset markets that cannot be pumped artificially any higher will start moving, under the forces of inevitable gravitation, lower.