Richmond Fed

• Ferguson in Flames (Reuters)
• Ferguson Cop Told Grand Jury He Feared for His Life (BBG)
• Sharpton: Grand Jury Announcement ‘An Absolute Blow’ (Daily Caller)
• Gunshots echo as violence returns to Ferguson, protests across U.S. (Reuters)
• BoJ members warned on costs of more easing (FT)
• Hagel Exit Shows Obama Has Taken Power Away From Pentagon (BBG)
• Ukraine leader, under pressure from West, pledges new government soon (Reuters)
• Eurozone Stagnation Poses Major Risk to Global Growth, OECD Warns (WSJ)
• ECB’s Coeure Says Officials Won’t Rush as They Debate All Assets (BBG)

Just two months after the OECD cut its global growth outlook, overnight the Organisation for Economic Co-operation and Development cut it again, taking down its US, Chinese, Japanese but mostly, Eurozone forecasts. In the report it said: "The Economic Outlook draws attention to a global economy stuck in low gear, with growth in trade and investment under-performing historic averages and diverging demand patterns across countries and regions, both in advanced and emerging economies.  “We are far from being on the road to a healthy recovery. There is a growing risk of stagnation in the euro zone that could have impacts worldwide, while Japan has fallen into a technical recession,” OECD Secretary-General Angel Gurria said.  “Furthermore, diverging monetary policies could lead to greater financial volatility for emerging economies, many of which have accumulated high levels of debt.” And sure enough, the OECD's prescription: more Eurozone QE. As a result, futures in the US are in fresh all time high territory ignoring any potential spillover from last night's Ferguson protests, just 30 points from Goldman's latest 2015 S&P target, Stoxx is up 0.5%, while bond yields are lower as frontrunning of central bank bond purchases resumes. Oil is a fraction higher due to a note suggesting the Saudi's are preparing for a bigger supply cut than expected, although as the note says "it is unclear if the cut sticks."

As Deutsche Bank observes, the Fed has been wanting to hike rates on a rolling 6-12 month horizon from each recent meeting but never imminently which always makes the actual decision subject to events some time ahead. They have seen a shock in the last few weeks and a downgrade to global growth prospects so will for now likely err on the side of being more dovish than in the last couple of meetings. They probably won't want to notably reverse the recent market repricing of the Fed Funds contract for now even if they disagree with it. However any future improvements in the global picture will likely lead them to step-up the rate rising rhetoric again and for us this will again lead to issues for financial markets addicted to liquidity. And so the loop will go on for some time yet and will likely trap the Fed into being more dovish than they would ideally want to be in 2015.

• CDC says returning Ebola medical workers should not be quarantined (Reuters)
• Sweden’s central bank cuts rates to zero (FT)
• Hacking Trail Leads to Russia, Experts Say (WSJ)
• Discount-Hunting Shoppers Threaten Stores’ Holiday Cheer (BBG)
• Apple CEO fires back as retailers block Pay (Reuters)
• Repeat after us: all China data is fake - China Fake Invoice Evidence Mounts as HK Figures Diverge (BBG)
• FX Traders’ Facebook Chats Said to Be Sought in EU Probe (BBG)
• Euro Outflows at Record Pace as ECB Promotes Exodus (BBG)
• Apple boosts R&D spending in new product hunt (FT)

If yesterday's markets closed broadly unchanged following all the excitement from the latest "buy the rumor, sell the news" European stress test coupled with a quadruple whammy of macroeconomic misses across the globe, then today's overnight trading session has been far more muted with no major reports, and if the highlight was Kuroda's broken, and erroneous, record then the catalyst that pushed the Nikkei lower by 0.4% was a Bloomberg article this morning mentioning that lower oil prices could mean the BoJ is forced to "tone down or abandon its outlook for inflation." This comes before the Bank of Japan meeting on Friday where the focus will likely be on whether Kuroda says he is fully committed to keeping current monetary policy open ended and whether or not he outlines a target for the BoJ’s asset balance by the end of 2015; some such as Morgan Stanely even believe the BOJ may announce an expansion of its QE program even if most don't, considering the soaring import cost inflation that is ravaging the nation and is pushing Abe's rating dangerously low. Ironically it was the USDJPY levitation after the Japanese session, which launched just as Europe opened, moving the USDJPY from 107.80 to 108.10, that has managed to push equity futures up 0.5% on the usual: nothing.

It started off so well: the day after the ECB said that despite a gargantuan €879 billion in bad loans, of which €136 billion were previously undisclosed, only 25 European banks had failed its stress test and had to raised capital, 17 of which had already remedied their capital deficiency confirming that absolutely nothing would change, Europe started off with a bang as stocks across the Atlantic jumped, which in turn pushed US equity futures to fresh multi-week highs putting the early October market drubbing well into the rear view mirror. Then things turned sour. Whether as a result of the re-election of incumbent Brazilian president Dilma Russeff, which is expected to lead to a greater than 10% plunge in the Bovespa when it opens later, or the latest disappointment out of Germany, when the October IFO confidence declined again from 104.5 to 103.2, or because "failing" Italian bank Monte Paschi was not only repeatedly halted after crashing 20% but which saw yet another "transitory" short-selling ban by the Italian regulator, and the mood in Europe suddenly turned quite sour, which in turn dragged both the EURUSD and the USDJPY lower, and with it US equity futures which at last check were red.

Modern central banks enjoy extraordinary independence, typically operating free from political interference. Central bank actions that alter the allocation of credit blur those boundaries and endanger the stability the Fed was designed to ensure. Such interference in the allocation of credit is an inappropriate use of the central bank’s asset portfolio. It is not necessary for conducting monetary policy, and it involves distributional choices that should be made through the democratic process and carried out by fiscal authorities, not at the discretion of an independent central bank.

If yesterday the bombardment, no pun intended, of bad news from around the globe was too much even for Mahwah's vacuum tubes to spin as bullish - for stocks - news, then tonight's macro economic updates have so far been hardly as bombastic, with the only real news of the day has Germany's IFO Business Climate reading, which dropped from 106.3 to 105.8, declining for the 5th month in a row, missing expectations, and printing at the lowest level of since April 2013! (More from Goldman below) Net result: Bunds yields were once again pushed in the sub-1% category, even if stocks today are higher because the European data is "so bad it means the ECB has no choice but to do (public instead of just private) QE" blah blah blah.

• U.S., backed by Arabs, launches first strikes on fighters in Syria (Reuters, BBG)
• But not all all back: Turkey Bars Kurds From Entering Syria to Fight Islamic State (BBG)
• Dollar Weakens on Airstrikes; Europe Stocks Drop (BBG)
• Ready for Rate Riot? Emerging Markets Set to Follow Fed (BBG)
• White House fence jumper had ammunition, machete in car, prosecutors say (WaPo)
• El-Erian "would have done things differently" (Reuters)
• Eurozone business growth slows in September, PMI survey finds (BBC)
• Shrinking Bond Desks Taken by Journeymen as Masters Fade (BBG)
• Manufacturing Rebound Relieves Growth Concerns in China (BBG)
• Former Trader Quits Playboy Club to Open Own Restaurant (BBG)

European stocks, U.S. equity index futures fall after Euro area PMI for Aug. missed ests., while bond yields for German, Spanish, U.K. debt fall. Copper rises with positive Chinese PMI data, while oil gains as OPEC discusses output cut. European health care stocks among largest underperformers as U.S. plans tighter rules on tax inversion M&A.

With the snoozer of an FOMC meeting in the rearview mirror, as well as Scotland's predetermined independence referndum, last week's key events: the BABA IPO and the iPhone 6 release, are now history, which means the near-term catalysts are gone and the coming week will be far more relaxed, if hardly boring. Here is what to expect.

If the big hope propelling both ES and S&P cash over 2,000 was the Ukraine-Russian talks, leading to some de-escalation and a thawing of Russian-German conditions, then it was clearly a dud. As the WSJ reports, "face-to-face talks between the Russian and Ukrainian presidents failed to produce a breakthrough for ending the conflict over eastern Ukraine, as Kiev released videos of captured Russian soldiers and rebels pushed toward a government-held city. The one-on-one session, which Ukraine's President Petro Poroshenko described as "tough and complex," ended early Wednesday after a day of talks on the crisis in the Belarusian capital of Minsk. Mr. Poroshenko said afterward that he would prepare a "road map" toward a possible cease-fire with the pro-Russia separatists." In other words, absolutely no progress. There was however escalation, when overnight the September Bund future rose as much as 36 ticks to 151.18, after Poland PM Tusk said “regular” Russian troops are operating in eastern Ukraine. And so we are back to square one, with concerns over Russia pushing European bonds to new record highs, in turn leading to more US Treasury buying, while a brand new rumor of more easing from the ECB, this time by Deutsche Bank, has propped up European equities, which like US futures are trading water around the critical 2000 level.

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).

Key highlights in the coming week: US Durable Goods, Michigan Conf., Services PMI, PCE, and CPI in Euro area and Japan. Broken down by day: Monday - US Services PMI, New Home Sales (Consensus 4.7%); Singapore CPI; Tuesday - US Durable Goods (consensus 7.5%) and Consumer Confidence; Wednesday - Germany GfK Consumer Confidence; Thursday - US GDP 2Q (2nd est., expect 3.70%, below consensus) and Personal Consumption; Euro area Confidence; CPI in Germany and Spain; Friday - US Michigan Conf. (consensus 80.1), PCE (consensus 0.10%), Chicago PMI; Core CPI in Euro area and Japan (consensus 2.30%). Additionally, with a long weekend in the US coming up, expect volumes into the close of the week to slump below even recent near-record lows observed recently as the CYNKing of the S&P 500 goes into overdrive.

Following a ghastly week for stocks, the momentum algos were desperate for something, anything to ignite some upward momentum and stop the collapse which last week pushed the DJIA into the red for the year: they got it overnight with the previously reported bailout of Portugal's Banco Espirito Santo, where the foreplay finally ended and after the Portuguese Central Bank finally realized that the bank is insolvent and that no more private investors will "recapitalize" it further, finally bailed it out, sticking the stock and the subs into a bad bank runoff entity, while preserving the senior bonds. So much for Europe's much vaunted bail in regime and spreading of pain across asset classes. At least the depositors did not get Cyprused, for now.