While the biggest news of the night had nothing to do with either oil or China, all that mattered to US equity futures trading also was oil and China, and since WTI managed to rebound modestly from their biggest 2-day drop in years, rising back over $30, and with China falling only 0.4% overnight after the National Team made a rare, for 2016, appearance and pushed stocks to close at the day's high, US E-minis were able to rebound from overnight lows in the mid-1880s, and levitate above 1900. Whether they sustain this level remains to be seen.
"The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities.... As a result of the severe decline in real activity and subdued inflation, short-term Treasury rates fall to negative ½ percent by mid-2016 and remain at that level through the end of the scenario."
"This Is Much Larger Than Subprime" - Here Are The Legendary Hedge Funds Fighting The Chinese Central BankSubmitted by Tyler Durden on 01/31/2016 21:57 -0400
Who are the brave souls who have decided to very openly fight the People's Bank of China? Here is a sample: Soros, Bass, Ackman, Druckenmiller, Tepper, Schreiber, Einhorn, Scogging, and Carlyle, Nexus and many more.
"... if interest rates go negative, the incentives reverse: people receiving payments will prefer checks (which can be held back from collection) to electronic transfers. Such a reversal could impose novel burdens on payment systems that have evolved in an environment of positive interest rates.... that if interest rates go negative, we may see an epochal outburst of socially unproductive—even if individually beneficial—financial innovation."
Many believed that the NOK was backed by oil, not requiring a gold reserve. However, oil is no longer a scarce resource but an abundant commodity. Switzerland, Germany, America and other first world nations have gold reserves. Norway should have one too.
China’s stock market is a small, relative matter; the more troubling imbalances lie and remain elsewhere. This change in production profitability is concerning on three fronts: China’s industry persists at only getting worse even though it has already reverted to a state not seen in a decade or more; consumer appearances may seem generally optimistic despite all that but only because industrial activity has yet to fully make adjustments through resources and labor; and financial trends are likely already at the stage of self-reinforcement within and without.
In the latest news out of the 1MDB saga, "Switzerland's chief prosecutor said on Friday a criminal investigation into state fund 1Malaysia Development Berhad (1MDB) had revealed that about $4 billion appeared to have been misappropriated from Malaysian state companies."
"The amount of the allegedly misappropriated funds amounted to approximately $ 4 billion, whose purpose is the subject of further study"...
With Citi's chief economist proclaiming "only helicopter money can save the world now," and the Bank of England pre-empting paradropping money concerns, it appears that Australia's largest investment bank's forecast that money-drops were 12-18 months away was too conservative. While The Finns consider a "basic monthly income" for the entire population, Swiss residents are to vote on a countrywide referendum about a radical plan to pay every single adult a guaranteed income of around $2500 per month, with authorities insisting that people will still want to find a job.
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"... When stocks are falling this much, it's hard to justify not acting"
"... Davos - where he mingled with central bankers such as ECB President Mario Draghi and leading company executives - likely prompted him to pull the trigger"
Here is the one chart which in our opinion virtually assures that the Fed will follow in the footsteps of Sweden, Denmark, Europe, Switzerland and now Japan.
"Never before have so many central banks explored sub-zero territory at the same time."
It is safe to say that nobody expected the BOJ stunner announced last night, when Kuroda announced that Japan would become the latest country to unleash negative interest rates, for one simple reason: Kuroda himself said Japan would not adopt negative rates just one week ago! However, a few BIS conference calls since then clearly changed the Japanese central banker's mind and as we wrote, and as those who are just waking up are shocked to learn, negative rates are now a reality in Japan. The immediate reaction was to send the USDJPY surging by nearly 200 pips, back to levels seen... well, about a month ago.
Well that did not last long. After initial exuberance over The BoJ's wishy-washy decision to adopt a 3-tiered rate policy including NIRP, markets have realized that without further asset purchases (which were maintained at the current pace), there is no ammo to lift stocks. An almost 200 point surge in Dow futures has been erased and Nikkei 225 has dropped 1000 points from its post BOJ highs... as 10Y JGB yields hit record lows at 11bps and 20Y JGB yields drop to 82bps - the lowest since 2003