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.
Just when you thought the humor out of the central bank that just released a stress test whose adverse scenario did not even assume the most likely Eurozone outcome, i.e., deflation, couldn't get any better, moments ago we learned that the test, which was supposed to restore confidence in Europe's banking system and in the oversight and regulatory abilities of Europe's central bank, had "errors and inconsistencies" which forced the ECB to "briefly remove from its website" the results of Italy's most insolvent bank, Monte Paschi, "after discovering an error in its key capital ratio", a bank which based on the ECB's (faulty?) failure assessment was halted countless times earlier today after crashing so hard the regulator had to ban selling it short. Again.
If you are wondering how it works...
Despite the ban on short-sales - which has never worked in the past to do anything but instil fear in traders' holding long positions - Italian banks are in free-fall following the utter failure of Draghi's stress tests to encourage confidence in the European banking system.
INTESA, UBI, UNICREDIT, MONTE PASCHI SUSPENDED IN MILAN, LIMIT DOWN
Given the post-"whatever-it-takes" world of domestic sovereign bond-buying, it is no surprise that Italian govvie risk is jumping higher and the FTSEMIB is plunging.
ECB Stress Test Fails To Inspire Confidence Again As Euro Stocks Slide After Early Rally; Monte Paschi CrashesSubmitted by Tyler Durden on 10/27/2014 07:09 -0400
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.
As we previously reported, the ECB's latest stress test was once again patently flawed from the start. Why? Because as we noted earlier, in its most draconian, "adverse" scenario, the ECB simply refused to contemplate the possibility of deflation. And here's why. Buried deep in the report, on page 75 of 178, is the following revelation which contains in it the scariest number presented to the public today.
One can't make this up: "The scenario of deflation is not there because indeed we don't consider that deflation is going to happen." - Vítor Constâncio, Vice-President of the ECB
The week ahead, as if it mattered.
As was leaked on Friday, when the market surged on news that some 25 banks would fail the ECB's third stress test (because in the New Normal more bank failures means more bailouts, means the richer get richest, means more wealth inequality), so moments ago the ECB reported that, indeed, some 25 banks failed the European Central Bank's third attempt at collective confidence building and redrawing of a reality in which there is about €1 trillion in European NPLs, also known as the stress test.
- 25 BANKS SHOWN WITH CAPITAL SHORTFALL IN ECB TEST: DRAFT TEXT
- ABOUT 10 BANKS SAID TO BE IN TALKS ON CAPITAL SHORTFALL
- 105 EURO-AREA BANKS PASS THE ECB'S ASSESSMENT: DRAFT DOCUMENT
- ECB PRELIMINARY ASSESSMENT RESULTS SEEN BY BLOOMBERG NEWS
130 banks are being tested. 12-18 will fail. And on top of that, almost a third of 130, that’s over 40, will pass while still getting their feet wet. That means anywhere between 40% and 44% of Eurozone banks either fail or are in bad shape. If 40% of your banks are either dead in the water or barely floating, I’d say you have a major problem. We all know our world, be it politics or economics, consists almost exclusively of spin these days, but in the face of these numbers we very much wonder how many people will be willing to bet their own money that Europe can get away with another round of moonsmoke and roses come Monday.
Equity Levitation Stumbles After Second ECB Denial Of Corporate Bond Buying, Report Of 11 Stress Test FailuresSubmitted by Tyler Durden on 10/22/2014 06:57 -0400
If the ultimate goal of yesterday's leak was to push the EUR lower (and stocks higher of course), then the reason why today's second rejection did little to rebound the Euro is because once again, just after Europe's open, Spanish Efe newswire reported that 11 banks from 6 European countries had failed the ECB stress test. Specifically, Efe said Erste, along with banks from Italy, Belgium, Cyprus, Portugal and Greece, had failed the ECB review based on preliminary data, but gave no details of the size of the capital holes at the banks.
Several days ago we were confused why, out of the blue, a €1 billion loan BWIC appeared that was dumping German non-performing loans. After all, the whole point of the European "recovery" fable to date has been to deflect all the attention from the "pristine" German banks, up to an including world-record derivatives juggernaut Deutsche Bank, and to focus on Greece and other insolvent peripheral European nation. Earlier today, German Handelsblatt provided an answer, when it reported that "four German banks are on the brink", i.e., four banks of which three are known, HSH Nordbank, IKB and MunchenerHyp, will likely fail the ECB's stress test whose results are due to be announced next Friday.
Dr. Ezekiel Emanuel, brother of Rahm Emanuel, says that society would be far better off if people quit trying to live past age 75. His new article entitled “Why I Hope To Die At 75” has the following very creepy subtitle: “An argument that society and families—and you - will be better off if nature takes its course swiftly and promptly”. In the article, Emanuel forcefully argues that the quality of life for most people is significantly diminished past the age of 75 and that once we get to that age we should refuse any more medical care that will extend our lifespans. This is quite chilling to read, considering the fact that this is coming from one of the key architects of Obamacare. Of course he never uses the term “death panels” in his article, but that is obviously what Emanuel would want in a perfect world. To Emanuel, it is inefficient to waste medical resources on those that do not have a high “quality of life”. So he says that “75 is a pretty good age to aim to stop”.
Moments ago, the Goldmanite in charge of the European Central Bank delivered yet another speech, this time seeking to offset some of the hawkish comments over the weekend from his comrades, all of which suggested that no more easing, or public QE, was coming any time soon. It was, as usual, full of the same lies that have pushed European stocks to highs not seen since Lehman even as Europe's economy is now slumping into a triple-dip recession. Here is a choice selection of his comments, properly annotated.