After three days of unexpected market weakness without an apparent cause, especially since after 7 years of conditioning, the algos have been habituated to buy on both good and bad news, overnight futures are getting weary, and futures are barely up, at least before this morning's transitory FX-driven stop hunt higher. Whether this is due to the previously noted "blackout period" for stock buybacks which started a few days ago and continues until the first week of May is unclear, but should the recent "dramatic" stock weakness persist, expect Bullard to once again flip flop and suggesting it is clearly time to hike rates, as long as the S&P does not drop more than 5%. In that case, QE4 is clearly warranted.
Despite Markit's PMI exuberance, it appears the awesomeness did not reach Richmond. Printing at a disastrous -8, against expectations of +3, Richmond Fed is the lowest since January 2013. The last 5 months have seen the index drop at its fastest rate since Lehman.
- Germanwings Airbus crashes in France, 148 feared dead (Reuters)
- Greece promises list of reforms by Monday to unlock cash (Reuters)
- Merkel Points Tsipras Toward Deal With Greece’s Creditors (BBG)
- Banks Shift Bond Portfolios -Move to ‘held to maturity’ category aims to guard against rising rates, shield capital (WSJ)
- Beijing to Shut All Major Coal Power Plants to Cut Pollution (BBG)
- As Silence Falls on Chicago Trading Pits, a Working-Class Portal Also Closes (NYT)
- Oil below $56 as Saudi output near record, China activity slows (Reuters)
It is a centrally-planned "market" and everyone is merely a bystander. Last night, following a dramatic China PMI miss, which as previously reported tumbled to the worst print since early 2014 and is flashing a "hard-landing" warning, the Shanghai Composite first dipped then spiked because all a "hard-landing" means is even more liquidity by the PBOC (which as we suggested a month ago will be the last entrant into the QE party before everyone falls apart). Then, this morning, a surprise beat by the German (and Eurozone) PMI was likewise interpreted by the algos as a catalyst to buy, and at this moment both European stock and US equity futures are their session highs. So, to summarize, for anyone confused: both good and bad data is a green light to buy stocks. In fact, all one needs is a flashing red headline to launch the momentum igniting algos into a buying spasm.
As previously observed (skeptically), a main reason for the surge in the DAX, and thus the S&P, on Friday was premature hope that the Greek talks earlier were a long-overdue precursor to a Greek resolution, and as we further noted yesterday, subsequent bickering and lack of any clarity as we go into today's critical "final ultimatum" meeting between Merkel and Tsipras, is also why the Dax was lower by 1.1% at last check, even if the EURUSD continues to trade like an illiquid, B-grade currency pair whose only HFT purpose is to slam all stops within 100 pips of whatever the current price may be.
It was not all smiles and jokes as Mario Draghi's European QE officially launched in Europe, with Greece leaving the proverbial turd in the monetary punch bowl.
When we parsed the newly released 2009 Fed transcripts yesterday we were too busy looking to uncover things like a previously unreported plan to create a bad bank to look for signs of central planner levity, but fortunately, the research department at Bloomberg was looking for the important stuff. Thanks to their efforts we have the official Fed Chuckle Count for 2009.
Stocks In Holding Pattern Following Blow-Off Top, Oblivious Of Fed's Warning Of "Stretched" ValuationsSubmitted by Tyler Durden on 02/25/2015 08:00 -0400
Following the first of two Janet Yellen testimonies to Congress, the market read between the lines of what the Fed Chairman said when she hinted that "the Fed needs confidence on recovery and inflation before beginning to raise rates" and realized that the case of a June rate hike is suddenly far less realistic than previously expected, as a result not only did we see another blowoff top in stocks to fresh all time highs, a move which sent the USD lower, has pushed the median EV/EBITDA multiple to the mid 11x (!) range and the forward PE to just shy of 18x ironically coming on a day when the Fed itself warned about "stretched" equity valuations, and led to brisk buying of global Treasurys across the board, pushing the 10 Year in the US back under 2%, and due to the global convergence trade (because if the Fed returns to QE, it will be forced to buy up Treasuries not just in the US but around the globe, since net issuance including CBs globally is now negative) and leading to today's German 5 Year bond auction pricing at a negative yield for the first time ever.
Despite this morning's US Services PMI rise, US macro data is running at a 90% miss rate in February and Richmond Fed's tumble from 6 to 0 (11mo lows) along with The Conference Board's Consumer Confidence dropping the most since Oct 2013 merely confirm this trend. This is the biggest 4-month slump in Richmond Fed since 2010 as practically every sub index deteriorated. California, Florida and New York saw over consumer confidence collapse and Texas saw 'present situation' plunge. US Macro data is now nearing its lowest in a year...
Just in case there wasn't enough on the calendar, between Yellen, Greece, consumer confidence, housing data, Richmond Fed, and of course stocks at another all time high, the latest news out of California is that a Matrolink commuter train struck at least two trucks between Oxnard and Camarilo, in a repeat of a similar tragic accident that took place in New York two weeks ago.
- Yellen faces Senate grilling on Fed rate policy, transparency (Reuters)
- Big Banks Face Scrutiny Over Pricing of Metals (WSJ)
- Greece makes more concessions to euro zone, Germany sets vote (Reuters)
- Time for another executive order: Longer Lives Hit Companies With Pension Plans Hard (WSJ)
- The Syria invasion "false flag" approaches: Islamic State in Syria abducts at least 90 from Christian villages (Reuters)
- Why Lenders Love the $2.5 Million Home Loan (BBG)
- Reuters journalist Maria Golovnina dies in Pakistan aged 34 (Reuters)
- Qatar’s Ties to Militants Strain Alliance (WSJ)
There was an expectation that today's receipt by the Troika of the revised Greek "reform proposal" would send risk and the EUR higher, which is probably precisely why nothing has happened so far, and US equity futures are unchanged ahead of what the HFT algos' new attention focus is today, namely Yellen's semi-annual testimony to Congress. As a result, the only thing that has seen notable strength this morning is the USD, which has surged to 119.50 against the Yen, and briefly pushed the EURUSD under 1.1300. which also means that WTI has also gone nowhere overnight and remains under $50. One wonders just what OPEC "rumor" those long crude will leak today.
With Greece moving to the, ahem, periphery if only for a few days/hours, this week the US calendar returns to the forefront with Fed Chair Yellen’s semi-annual monetary policy testimony before the Senate Banking Committee tomorrow night and the House Financial Services Committee on Wednesday, which the market will be paying very close attention to for the reconciliation of how the Fed plans to continue on its rate-hiking path despite rapidly deteriorating US macro data that has started 2015 at the worst pace (in terms of downside surprises) since Lehman.
If you thought the Greek tragicomedy is over, you ain't seen nothing yet, because despite the so-called Friday agreement, the immediate next step is for Greece to submit its list of reform measures to the Troika, which will almost certainly result in an immediate revulsion in Germany's finance ministry, and lead to another protracted back and forth between the Troika and Greece, which may once again well end with a Grexit, especially if the Greek liquidity situation, where bash is bleeding from both the banks and the state at a record pace, remains unhalted. It is therefore not surprising that the ongoing decline in the EURUSD since the inking of the agreement, and the fact that the pair briefly dipped below 1.13 this morning - over 100 pips below the euphoric rip on Friday - is a clear indication that the market is starting to realize that absolutely nothing is either fixed, or set in stone.
A current Bank of America employee has made a number of whistleblower submissions to the U.S. Securities and Exchange Commission about the role played by the U.S. banking subsidiary in financing dividend-arbitrage trades: trades which used taxpayer-backed funds to allow hedge funds to avoid paying taxes. The employee’s submissions allege that Bank of America’s London-based Merrill Lynch International unit has extended “extreme levels of BANA leverage” to fund “increasingly aggressive and reckless” tax-avoidance trades. The submissions said the practices risked causing the bank “serious financial and reputational damage.”