There are just two drivers setting the pace for today's risk mood: the OPEC meeting in Vienna which started a few hours ago, and the ECB's announcement as well as Mario Draghi's press statement due out just one hour from now. Both are expected to not reveal any major surprises, with OPEC almost certainly unable to implement a production freeze while the ECB is expected to remain on hold and provide some more details on its corporate bond buying program, although there is some modest risk of upside surprise in either case.
Just days after Toyota became the latest investor in Uber, in hopes of boosting car lease transactions, moments ago FT reported that Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, is investing $3.5 billion in the ride-sharing company. This would be the largest single investment ever made in a private company. As the FT notes, this brings Uber's cash holding to more than $11billion at a time when the company is aggressively expanding in nearly 70 countries worldwide.
After yesterday's US and UK market holidays which resulted in a session of unchanged global stocks, US futures are largely where they left off Friday, up fractionally, and just under 2,100. Bonds fell as the Federal Reserve moves closer to raising interest rates amid signs inflation is picking up. Oil headed for its longest run of monthly gains in five years, while stocks declined in Europe.
In his latest letter to investors, OakTree Capital's Howard Marks goes political (slamming Trump's tariffs and Bernie's minimum wage machinations), shedding some blinding light on the economic reality of America, the dismal failure (and increasing impotence) of central bankers, and the ongoing "tryanny of the majority" warning that if everyone wants to tax-the-rich, soon there will be no rich to tax. As he concludes, short-term fixes simply cannot create wealth out of thin air (see Venezuela), as Churchill once said "for a nation to try to tax [or stimulate or devalue] itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."
Less than two weeks after Apple unveiledan unexpected $1 billion investment in China's Didi Chuxing, an amount some have speculated may be the cost of continuing "business as usual" for Apple's service offerings in China, moments ago Toyota unveiled that it would inject an undisclosed amount of funds in one of the most valuable private "Decacorns" in the US, Uber.
Not only is China facing a significant risk of an economic hard landing, but, as we have noted on many occasions, the country is also facing what perhaps may be an even greater risk: social unrest. As the economy continues to weaken, and layoffs continue to mount, China has started to relax its own labor rules in order to try and keep everyone happy... for now; as China is experiencing a surge in part-time workers. In order to control costs, but still meet whatever demand comes, Reuters reports factories are now hiring by the day instead of keeping workers around in a full employment contract.
If yesterday's selloff had a specific catalyst, namely some of the worst consumer retail earnings seen in years, it merely undid the Tuesday rally which levitated global risk with no fundamental driver, aside for a 200 pip spike in the USDJPY. Some central bankers may even say it was a "magical" levitation. Fast forward to the overnight session when following a muted Asian session, it was once again up to the "magical" USDJPY to send stocks well into the green without any actual catalyst whatsoever, but what merely appears to have been another "magical" intervention session by the BOJ.
In order to attract and retain small and big business alike, it's long been a tactic by states and local governments to offer tax breaks. However, as times have got tough - and rules have changed - in Obama's "recovery", government subsidies to their cronies - of at least $50 million - have plummeted by 70% Bloomberg reports.
With the Fed decision just one day away, followed the very next day by the increasingly more irrational BOJ, stocks had no desire to make significant moves and overnight's boring session was the result, as European stocks and U.S. index futures rose modestly but mostly hugged the flatline while Asian declined 0.2% for a third day as raw-material shares declined and Tokyo equities slumped before central bank meetings in the U.S. and Japan this week. China’s stocks rose the most in almost two weeks, up 0.6% but failed to rise above 3000 on the Shanghai Composite, in thin trading.
It's all fun and games until someone is caught cheating. That is the lesson that Volkswagen learned last fall, when the German car manufacturer was caught using software that could detect when an emissions test was taking place in order to give better results. Today, it looks like Mitsubishi Motors will learn that very same lesson. "We express deep apologies to all of our customers and stakeholders for this issue," Mitsubishi said in a statement, also saying that the company "conducted testing improperly to present better fuel consumption rates than the actual rates."
A new study finds there were more than twice as many big earthquakes in the first quarter of 2014 as compared with the annual average since 1979... “We have recently experienced a period that has had one of the highest rates of great earthquakes ever recorded..."
Following yesterday's OPEC "production freeze" meeting in Doha which ended in total failure, where in a seemingly last minute change of heart Saudi Arabia and specifically its deputy crown prince bin Salman revised the terms of the agreement demanding Iran participate in the freeze after all knowing well it won't, oil crashed and with it so did the strategy of jawboning for the past 2 months had been exposed for what it was: a desperate attempt to keep oil prices stable and "crush shorts" while global demand slowly picked up. And whether it is central banks, or chronic BTFDers, just 12 hours after oil opened for trading with a loud crash, the commodity has nearly wiped out all losses, and both brent and WTI were down barely 2%, leading to both European stocks and US equity futures virtually unchanged on the session.
On Sunday Toyota was one of many Japanese companies to announce that it will suspend most car production across Japan as a result of critical supply chain disruption caused by the recent destructive earthquake and numerous aftershocks. The earthquakes reflected the vulnerability of Japanese companies to supply chain disruptions caused by natural disasters, and also highlighted the "just in time" philosophy pioneered by Toyota and followed by many others.