SocGen

Frontrunning: March 11

  • Fed Likely to Remove ‘Patient’ Barrier for Rate Increase as Soon as June (Hilsenrath) - which year?
  • Clinton says used personal email account for convenience (Reuters)
  • Euro sinks to 12-year lows as yield gap grows (Reuters)
  • Get Ready for Oil Deals: Shale Is Going on Sale (BBG)
  • EIA raises 2015 US oil production forecast, cuts 2016 outlook (Reuters)
  • How Falling Oil Prices Are Hindering Iraq’s Ability to Fight Islamic State (WSJ)
  • China economic data weaker than expected, fuels policy easing bets (Reuters)
  • ECB ‘Chasing Own Tail’ as Bond Rates Turn Negative, SocGen Says (BBG)
  • Swiss makers quietly gear up with smartwatches of their own (Reuters)

Euro In Freefall, Dollar Surge Accelerates; Futures Rebound On USDJPY Rise; Greece On The Ropes

While the dollar strength this morning, which has pushed it to a fresh 13 year high and has accelerated the EURUSD plunge to under 1.06 - a drop of over 300 pips since the start of the week - has been a recap of yesterday's trading action, the main difference is that unlike yesterday, the USDJPY has managed to find a strong bid in the overnight session, pushing not only the Nikkei up by 0.4%, but also lifting US equity futures as the entire global marketplace is now merely a sandbox in which the central banks try to crush their currencies as fast as possible.

Futures Sell Off As Soaring Dollar Weighs On Risk, European Yields Slide To Fresh Record Lows

As noted earlier, starting early with the overnight session there was already some serious fireworks in Asia, when first the USDJPY soared then tumbled, pushing the Nikkei lower some 0.7% with it, driven entirely by the surge in Dollar which rose to a fresh 12 year high overnight after gaining as much as 0.59%, in an extension of Friday’s post-NFP gains. Additionally, the EUR/USD slipped below 1.0800 to touch its lowest level since Sept’03 while USD/JPY rose above 122.00 for the first time since Jul’07, after breaching long-term resistance at 121.85. However, in recent trade the pair has seen a straight line sell-off which in turn has sent US equity futures sliding, and the ES down about 14 points as of this moment. Meanwhile, the frontrunning of the ECB continues, with German 10 Year yields sliding -3bps to 0.281%, the lowest in series history. Also touching fresh record lows were Austrian, Belgian, Dutch, Finnish, Irish, Italian, Spanish 10 Year rates.

Goldman Blames Weather For Stronger Oil Prices, Sees WTI Sliding Back To $40

As we noted over the weekend when we showed a simple contango math calculation by SocGen according to which storage costs imply another 20% drop in Brent prices, now none other than Goldman - which has been oddly bearish on oil over the past few weeks - says that its Brent forecast remains at $40/bbl for two simple reasons: i) the global inventory glut is set to resume and ii) it's the weather's fault there has been a slowdown in the crude build-up.

"Give Everyone A Check For $10 Million, It Will Create Inflation": Albert Edwards First TV Interview In 20 Years

In his first TV interview in 20 years, SocGen's Albert Edwards unleashes his brutal honesty on Raoul Pal in this excellent RealVisionTV discussion. From "what Japan is doing is absolutely off the scale," warnings about money-printing to the awkward reality that "policy makers cannot eliminate the business cycle," warnings instead that "they will make the eventual downturn far worse than it otherwise would be..." Edwards' discussion ranges from the UK and US "choosing lunatic policies" to describing Alan Greenspan as "a prospective economic war criminal," the SocGen strategist concludes, rather ominously, if policy-makers keep handing out free money, it will create massive problems, "there is a trigger point where you can create inflation. I don't know where that is. The central banks don't know where that is."

Turkish Lira Tumbles To Record Low As Government Questions Central Bank's Patriotism

Another day, another currency hits a record low against the US Dollar. The Turkish Lira has collapsed in recent weeks since Erdogan rampaged against the 'independence' of the Central Bank and extended losses today after the economy minister said the government should discuss changing central bank regulations. Nihat Zeybekci said the Central Bank of Turkey’s independence should be conditional on the body taking “national interest” into account. Turkey continues to dump gold at record rates (money laundering to Iran via Switzerland?) and social unrest is on the rise (despite new laws to clamp down on protests) as the US consulate faces bomb threats.

Ten Banks, Including JPM, Goldman, Deutsche, Barclays, SocGen And UBS, Probed For Gold Rigging

According to the WSJ, "prosecutors in the Justice Department’s antitrust division are scrutinizing the price-setting process for gold, silver, platinum and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation, these people said. The agencies have made initial requests for information, including a subpoena from the CFTC to HSBC Holdings PLC related to precious-metals trading, the bank said in its annual report Monday. Who is involved in this latest gold-rigging scandal? Why everyone! ... which makes it immediately obvious why the European regulator had to promptly cover up the whole affair. Under scrutiny are Bank of Nova Scotia , Barclays PLC, Credit Suisse Group AG , Deutsche Bank AG , Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Société Générale SA, Standard Bank Group Ltd. and UBS AG , according to one of the people close to the investigation.

Throw Your Grandma Under The Bus

When the German/Eurogroup decision came to throw either their own biggest banks, or the grandmas of a co-member nation of the currency union under the bus, they didn't even hesitate since they have control over the perfect vehicle for such tasks: the ECB (an allegedly neutral institution that in reality peddles political influence in a way that guarantees the poorer countries will always wind up footing the bill). For those of you who don’t want to wake up one day to find their own grandmas crushed under the same bus the Greek yiayia’s are under as we speak, it would be beneficial to ponder how perverse this all is, not just the isolated events but the entire underlying system that produces them. Banks are more important than people, certainly grandmas.

Russia Dumps Most US Paper Ever As China Reduces Treasurys Holdings To January 2013 Levels

Back in December, Socgen spread a rumor that Russia has begun selling its gold. Subsequent IMF data showed that not only was this not correct, Russia in fact added to its gold holdings. But there was one thing it was selling: some $22 billion in US Treasurys, a record 20% of its total holdings, bringing its US paper inventory to just $86 billion in December - the lowest since June 2008.

Albert Edwards' On The Next Shoe To Drop: The Realization That Core Inflation In The US And Europe Are The Same

"The next shoe to drop will be the realisation that the US recovery is stalling and outright deflation is as big a threat there as it is in the eurozone. Indeed my former esteemed colleagues Marchel Alexandrovich and David Owen pointed out to me that if US core CPI is measured in a similar way to the eurozone (i.e. ex shelter), then US core CPI inflation is already pari passu with the eurozone ? despite the former having enjoyed a much stronger economy!"

Turkish Lira Crashes To New Record Lows, Erdogan Slams "New York Times Owners"

Following his outburst at the "independence" of the Turkish Central Bank earlier this week (which crashed the Lira), President Erdogan has opened his mouth again this morning...

*ERDOGAN: TURKEY NEEDS NEW CONSTITUTION AND PRESIDENTIAL SYSTEM, and
*ERDOGAN SAYS PEOPLE SHOULD RESEARCH NEW YORK TIMES OWNERS

So the blame for his nation's weakness is an independent central bank and the NY Times... The Lira just passed 2.47 to the USDollar - a record low.

Turkish Lira Plunges To Record Low After Erdogan Lambasts Central Bank "Independence"

"The honeymoon is over," warned SocGen overnight as "the trade of the year" turned into carnage after, essentially, a big policy error on the part of the central bank in the context of serious political pressures. Just today President Erdogan explained to whoever would listen that "interest rates are the cause of inflation," and "some are trying to hold Turkey back with interest rates," adding that "you can't decide interest rates based on inflation." However, his conclusion was what really sent the Turkish Lira spiralling... "unfortunately, this is the result of an independent central bank."