Asian Markets In Turmoil - Weak Japanese Bond Auction; Surprise Aussie Rate Cut; India Holds Rates, Cuts Reserve RatioSubmitted by Tyler Durden on 02/03/2015 01:27 -0400
UPDATE: *INDIA'S CENTRAL BANK KEEPS BENCHMARK POLICY RATE AT 7.75%, CUTS SLR TO 21.5% OF NDTL FROM 22%
UPDATE: Dow Futs -80 points, S&P Futs -9pts
Following the 15th surprise rate cut of 2015 (Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and now Australia), the Aussie Dollar has cratered to its lowest since May 2009 against the US Dollar at 0.7650 (and bond yields crashed by the most since 1997 to record lows). Aussie stocks kneejerked higher (on an extremely dovish RBA statement) but are fading (as are Chinese stocks). Perhaps even more concerningly indicative of the central banks losing control, following this morning's weak Japanese auction (or more properly expressed - BoJ monetization farce), USDJPY (under 117), Japanese stocks (down 350 points from US session highs), and JGBs (yields up 6-8bps) are all being sold.
During the fiscal year that ended on September 30, 2014, U.S. Special Operations forces (SOF) deployed to 133 countries - roughly 70% of the nations on the planet - according to Lieutenant Colonel Robert Bockholt, a public affairs officer with U.S. Special Operations Command (SOCOM). And this year could be a record-breaker, just 66 days into fiscal 2015 - America’s most elite troops had already set foot in 105 nations, approximately 80% of 2014’s total. Despite its massive scale and scope, this secret global war across much of the planet is unknown to most Americans…”We want to be everywhere,” said Votel at Geolnt...
Yesterday we reported that in less than 1 month in 2015, so far a whopping 13 countries have proceeded with "surprising" rate cuts: Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan. As of this morning, make that total 14, because in one of the more "surprising surprises" so far, it was none other than the Bank of Russia which cut its main interest rate from the 17% shocker it instituted at an emergency session on December 17 to halt the Ruble collapse (as a result of the crude price plunge) to 15% less than an hour ago. At the same time it cut the deposit rate to 14% and the repo rate to 16%.
The daily bulletin of Italy’s Communist Refoundation Party published today the apparently official program of the Greek coalition of the left, Syriza. Here the 40 points of the Syriza program...
For those keeping track of currency wars around the globe, 2015 - a year in which two central banks, those of Switzerland and Singapore have already admitted defeat, is shaping up as nothing short of historic. As DB's summarizes: just about 31 countries have, in less than a month, eased in the form of 13 mostly "surprise" rate cuts, while just 5 have tightened monetary policy.
The bottom line is that unfortunately for the BTFDers, with the Fed no longer giving explicit buy signals with the "considerable time" language struck, and with an implicit economic upgrade suggesting a rate hike is still on the table, it is becoming increasingly more difficult to frontrun the Fed's "wealth creation" intentions.
In the two days after Syriza's dramatic victory in the local Greek election, global investors assumed this loud cry against European policies would mean... more of the same, and as a result not much changed in the risk assessment of Greek assets. Then, overnight, following the previous report that not only does Syriza mean business but it is actively pivoting away from Europe (and toward Russia?), and everyone started paying attention, with a waterfall of selling engulfing not only the Greek stock market but also its bonds, which are crashing in the process sending the 3 Year yield to 16.4%, the highest since the restructuring, and the 10 Year either below or above 10%, depending on which data source is used (Bloomberg has them slightly below, others reporting 10-year bond yields up 50 basis points at 10.30%).
To this day, many governments around the world maintain a tight grip on dissent. There was a time long ago when the US was a refreshing outlier in this trend. At the time of its founding, the Land of the Free took a bold stance in asserting that its citizens all had a number of inalienable rights. But gradually these rights have been chipped away, particularly in this century as we’ve seen the rise of a tradeoff between liberty and security. This past month, one Congressman finally said that enough was enough and proposed a new bill to bring back our First Amendment rights... Just two weeks after the bill was submitted, it was squashed.
- ECB to decide on bond-buying plan to revive euro zone (Reuters)
- Draghi Is Pushing Boundaries of Euro Region with QE Program (BBG)
- Investors Wonder Whether ECB Will Do Enough (WSJ)
- Treasuries Drop With Bunds Before ECB; U.S. Futures Rise (BBG)
- European shares hit seven-year high (Reuters)
- At least eight civilians killed in shelling of Ukrainian trolleybus (Reuters), both sides blame each other
- OPEC Will Blink First in Battle With Shale Drillers, Poll Shows (BBG)
- China Injects $8 Billion Into Banking System (WSJ)
- New York says Barclays not cooperating in 'dark pool' probe (Reuters)
The fix for low oil prices is... low oil prices. Past some point high-priced producers will naturally stop producing, the excess inventory will get burned up, and the price will recover. Not only will it recover, but it will probably spike, because a country littered with the corpses of bankrupt oil companies is not one that is likely to jump right back into producing lots of oil while, on the other hand, beyond a few uses of fossil fuels that are discretionary, demand is quite inelastic. And an oil price spike will cause another round of demand destruction, because the consumers, devastated by the bankruptcies and the job losses from the collapse of the oil patch, will soon be bankrupted by the higher price. And that will cause the price of oil to collapse again. And so on until the last industrialist dies...
Breaking the stranglehold of vested interests is the essential step to rebuilding an economy that isn't totally dependent on manipulated money and statistics.
Ahead of today's Turkey central bank decision, consensus was expecting no change in either the benchmark repurchase rate (at 8.25%), nor the overnight lending and borrowing rates (at 11.25% and 7.50%, respectively). And then, out of the blue, the Turkish deputy Prime Minister was kind enough to inform markets precisely what non-consensus move the Turkish central bank will do today: TURKEY SEES RATE CUT TOMORROW BY CENTRAL BANK, DEP. PM SAYS. Sure enough, moments ago we got confirmation that when it comes to "independent" central banks leaking information to so-called heads of state such as France's Francois Hollande, Turkey is not far behind: TURKEY'S CENTRAL BANK CUTS BENCHMARK REPO RATE TO 7.75%
The precarious "game theory" equilibrium that worked for decades while OPEC was still a functioning cartel is unwinding before everyone's eyes. Just as Saudi Arabia accurately anticipated, the lower the price of crude goes, the more both OPEC members and their non-OPEC peers (especially shale companies funded by hundreds of billion in junk bonds) will have to produce in order to keep their budgeted revenues roughly in line (and keep creditors happy for the time being) in the process setting off an unprecedented wave of bankruptcies and production capacity declines, which take about 6-12 months after the price plunge to materialize. Case in point: the country formerly known as Iraq (and now better known as that region around the Tigris and the Euphrates that does not belong to ISIS) is pumping crude at a record pace and will continue to boost exports this year, its Oil Minister Adel Abdul Mahdi said.
Once again the mainstream media peddled the spoon-fed propaganda that world leaders "led the march" to honor the victims of the Paris shootings last week. Glorious photo-ops of Merkel, Hollande, Poroshenko, David Cameron (oh, and not Barack Obama) were smeared across front pages hailing the "unity in outrage." However, as appears to be the case in so many 'events' in the new normal managed thinking in which we live, The Independent reports, French TV has exposed the reality of the 'photo-op' seen-around-the-world: the 'dignitaries' were not in fact "at" the Paris rallies but had the photo taken on an empty guarded side street...