The latest batch of European consumer confidence data is a very mixed bag. On the weak side, the French continue to be miserable, notable outliers to the rest of the majors, and German confidence has now fallen for 7 straight months. However, Italians have not been this confident since 2002 and for the first time since 2009, both Italian and Spanish consumer confidence is higher than Germany's. So if everyone is so damn confident, why does Draghi continue to push for moar emergency easing?
Haruhiko Kuroda owns 52% of all Japanese ETFs. And now he wants more. Facing a lack of willing JGB sellers, the BoJ now faces the possibility that ramping up its easing efforts will entail expanding the bank's already elephantine equity portfolio. "At a fundamental level, I don’t support the idea of central banks buying ETFs or equities. Unlike bonds, equities never redeem. That means they will have to be sold at some point, which creates market risk."
Back at the beginning of 2014 - when commercial traders were net long nearly 40,000 options and futures contracts on the US long bond - it marked the peak in yields and preceded a 13 month rally in bonds that took 30-year treasury rates from 4% to 2.25%. Now, as Gavekal Capital's Bryce Coward notes, the commercial traders, aka "smart money," were net long about 61,000 contracts, or 50% more contracts than the peak in 2014. If recent history is any guide then a 1 handle on the 30-year treasury bond could be a reality!
The great buyback manio of the past 3 years may soon be ending, for two key reasons.
Having received the support of the various warring (and whining) factions within the Republican Party, Paul Ryan has just garnered enough votes to become the 54th House Speaker. As CNN reports, Ryan began turning the page on Wednesday, telling reporters after his party's internal vote that, "we are not going to have a House that looks like it's looked the last two years. We are going to move forward. We are going to unify. Our party has lost its vision, and we are going to replace it with a vision."
Following the carnage in new home sales in September, amid sliding mortgage apps and despite soaring homebuilder sentiment, pending home sales in September also plunged - dropping 2.3% MoM (missing expectations of a 1.0% rise) and worse still from a downwardly revised history. This is the biggest MoM drop sicne Dec 2013 andthe second lowest level of pending home sales this year. While there is plenty of blame for this, NAR's Larry Yun, rather ominously warns, "signs of a slowing U.S. economy may be causing some prospective buyers to take a wait–and–see approach."
“NATO military planning generates confrontational approaches to security issues that in our view should belong to the past. The creeping increase in NATO’s military presence on our frontiers [is] testing [our] patience."
Presented with little comment, aside to note it appears Americans need even moar in order to be happy...
We're all minions now of the stock market. By cowering in terror of a stock market tantrum, the Fed has surrendered everything: its vaunted (and completely phony) independence; its duty (yes, go ahead and laugh) to the nation and the real economy - everything. The Fed is nothing but an abject slave of the market.
Stop-running algos are panic-buying WTI crude this morning as a slightly disappointing GDP print must have triggered the "bad news is good news" function to horde oil with both hands and feet...
The long awaited inventory correction is finally arriving. Moments ago the BEA reported preliminary Q3 GDP, which at 1.49%, missed both sellside consensus expectations of 1.6%, and tumbled from the 3.9% reported in the second quarter as the quarterly volatility continues at an unprecedented pace. This was the second lowest quarterly GDP print since Q1 2014 excluding the "double seasonal adjustment" meant to cover up the collapse in Q1 2015 GDP.
The raw initial claims data rose 1k from 259 to 260k (beating expectations of 265k). But the less-noisy 4-week average of initial jobless claims has slid further this week - to 263.25, its lowest since Dec 1973 - as the divergence between "useless at this point in the business cycle" claims and 'real' job cuts has never been wider.
When it comes to the Fed's current "data dependent" thinking there is absolutely no agreement among the experts: it may or may not hike in December, or it may or may not hike in the 2016 election year. There is, however, much agreement that what the Fed is doing can best be summarized with two simple words: "policy mistake" as the following chart showing the appearance of these two words in Bloomberg news stories confirms.