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New Year Euphoria Fading

Tyler Durden's picture





 

The bipolar mood swing over the short-term band aid Fiscal Cliff non-solution may be over, and finally the market, which yesterday saw the official breach of the debt ceiling on the final day of 2012 on paper, may be starting to look forward 58 days to that day in February, (or more likely March), when the real catalyst as we have said all along- the increase of the US debt ceiling by another $2.4 trillion - has to be resolved. Futures are down a modest 5 points even as the EURUSD slide continues now that year end window dressing repatriation means European banks no longer need to show the currency on their books - at some point the EURUSD-ES correlation algos will kick in but not yet. Keep in mind that in the summer of 2011 the debt ceiling negotiations started some two months before the D-Day in early August, this time around politicians, who have learned nothing, will likely leave all debate until the very last moment once again, as the democrats assume the GOP will fold like a cheap lawn chair once again, even as the tensions at the GOP to do just the opposite hit a fever pitch. Which is why not even Goldman Sachs, as confirmed in a note by Alec Philips last night (coming shortly), cares to predict what (or when) the "debt ceiling 2013" outcome will be.

For those (few) who care about actual newsflow, here is a brief recap from Citi:

S&P 500 equity futures are trading lower this morning (-3.90), following the strong rally that markets have experienced as a result of fiscal cliff aversion and ahead of numerous macro data points due out later this morning. European equities are trading broadly lower, as investors exhibit caution ahead of unemployment data out of the US (ADP and NFP) and the continued US budget negotiations that will take place in the coming weeks.

European markets losing some ground this morning after the strong rally yesterday. Eurostoxx trading down 50bps, FTSE100 down ca. 10bps. The Swiss market outperforming the broader European markets as it catches up in its first trading session since the 28th of December. Risk off the more general tone in the markets as future concerns regarding U.S. spending cuts and increased noise regarding a potential ratings cut begin to surface with some negative Moody’s comments on the tape yesterday.
 
So more of a risk-off sentiment in Europe today and we see a small correction of some of yesterday’s moves. Miners the biggest underperformer today, currently trading down 60bps. Some negative comments on the tape from the Rio Tinto Iron Ore CEO, stating that the current spike in Iron Ore prices is only temporary. Utilities and Chems also underperforming this morning, K+S putting some pressure on the sector, we have downgraded the stock to Neutral and taken down our TP to €38 post the announcement of the Canpotex / Sinofert deal. Healthcare, +1.2%, the clear outperformer this morning but driven higher by the Swiss names in the sector (Novarits, Roche and Sonova). Had the first of the numbers in the retail sector this morning with Next reporting. Small beat mainly on the directory buesness and should see consensus upgrades of about 2/3%. Big week in UK retail reporting starting next week with Morrison on the 7th, Sainsbury on the 9th and  Tesco on the 10th of January.
 
On the macro front as expected, Norwegian PMI was basically unchanged in December (50.0 vs. 50.2 in November), and hence continues to signal stagnation in Norwegian industry. This is the second consecutive month with a reading of 50, and follows two quarters of contracting manufacturing activity (according to PMI readings). German Unemployment rises less than expected, +3k vs +10k expected.
 
In emerging, mkts mixed with CEE tracking developed Europe moves slightly lower, SA (-0.1%) on profit taking in miners following yday's beta rotation but outside of that it feels like business as usual with some of last yr's offshore favourites still posting new highs (Tiger Brands, Vodacom etc) as funds continue to use fresh inflows to replicate existing portfolios; Russia (-0.1%) too seeing a bout of profit taking in the mining space, the index supported by financials which are still catching a bid despite some strong moves higher yday. Turkey (+0.3%) at fresh highs with banks (+0.6%) buoyed by the govt's decision yday to cut the withholding tax on long term deposits, which in theory should help them decrease duration mismatches on the b/ce sheet. Volumes picking up, now at 0.8x adv (Vs c.0.6x yday) helped by a resumption of passive inflows into the region.

On the macro front, the German Dec unemployment report was in line with economist expectations (at 6.9%), while Spain’s Dec Unemployment report was better than expected (at -59.1K vs. consensus of 62.5K). Asian equity markets finished higher, though gains were capped by lower oil prices and profit taking from yesterday's rally. Australia extended gains (+0.82%), as miners advanced on higher commodity prices. Japan and China were closed again for the New Year Holiday.

On today’s macro front, look for: MBA Mortgage Applications (07:00), the ADP Employment Report (08:15), and Initial/Continuing Jobless Claims (08:30). FDO reports prior to the market open, while SONC reports following the market close.

* * *

Sadly, as in the two months preceding the New Year and the Fiscal Cliff can kicking non-deal, it is once again the case that the market will ignore all macro news, and cash flow (whereever it can actually be found) developments for as long as possible, as those are indicators of reality, and certainly not of some mutated, twisted market where "valuation" is determined by just how many VIX futures a central bank may sell at any given time. Instead what the market will again focus on is the straw man of the approaching debt ceiling, which eventually will pass of course, although this time with far more kicking and screaming by the market.

In the meantime, we look forward much more to tomorrow's CFTC COT report than the NFP jobs number, and especially the VIX futures net non-commercial spec position. Following this week's euphoria, there must be almost no more VIX futures left to sell.

 


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Thu, 01/03/2013 - 08:17 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Need some aspirin mucho pronto.

 

Since they seem to care so much....please have a Hollywood celebrity deliver it in person.

Thu, 01/03/2013 - 08:32 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

Whenever I feel blue, I plug in a Morgan Freeman audio book, wash down a box of whole wheat Ritz crackers with a bottle of Probiotic, and sink back into my statist liberal subsidized-stomach stupor.

Thu, 01/03/2013 - 08:40 | Link to Comment Gazooks
Gazooks's picture

2 blueberry bong hits every 4 hrs and call me in the morning.

Thu, 01/03/2013 - 12:34 | Link to Comment Freddie
Freddie's picture

Morgan Freeman is an obama loving racist.  Keep being a sheep and supporting Hollywood.

Thu, 01/03/2013 - 08:42 | Link to Comment stocktivity
stocktivity's picture

As if the same old same old won't play out again...a last minute deal...more printing money out of thin air...kick the debt ceiling down the road....market rallies big time the following day....It's all Bullshit!!!

Thu, 01/03/2013 - 09:11 | Link to Comment Stock Tips Inve...
Stock Tips Investment's picture

The U.S. economy has many challenges ahead. However, the economy has shown significant progress. We have doubts on one side and the other side progress. I think the market is showing exactly that duality. In recent months, I have tried to do my tradings in the stock market, "ignoring" the news. The results have been very good. So much conflicting information ends up confusing small investors. Currently, the market is responding favorably to economic conditions (and the solution of the "fiscal cliff"). While conditions remain, the market will continue to rise and we benefit from that.

Thu, 01/03/2013 - 09:32 | Link to Comment boogerbently
boogerbently's picture

Today, gold down because of "strengthening dollar" ???

Thu, 01/03/2013 - 10:31 | Link to Comment Chief KnocAHoma
Chief KnocAHoma's picture

BONER - (Standing by a tanning bed and speaking on his cell phone as he undresses down to a skimpy thong.) Mr. President we are serious this time. The debt ceiling will not be raised unless there are srious and significant cuts in government spending.

OBAMA - (Sitting on a beach smoking a joint will Bill Ayers.) Now Mr. Speaker... we have been over this. It is futile to resist the power of the dark side.

BONER - But those freaking Tea Party, Ron Paul worshipers are serious. They'll vote me out of my speaker job if you don't give me  token cuts.

OBAMA - Mr. Speaker I'm gona have to call you back. It is time for morning prayer. (He disconects the call and bows towards Mecca.)

BONER - (Looking at his phone.) Ass hole took up my tanning time for that? 

Thu, 01/03/2013 - 08:17 | Link to Comment Richard Whiskey
Richard Whiskey's picture

Must mean profits in the near future. Cha-Chang!

Thu, 01/03/2013 - 08:19 | Link to Comment westboundnup
westboundnup's picture

The markets will revert to 2012 levels before I get rid of my Christmas tree.

Thu, 01/03/2013 - 08:29 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

Once the rumor mill kicks in everything will return to bullishness.

Thu, 01/03/2013 - 08:30 | Link to Comment SpanishGoop
SpanishGoop's picture

Euphoria, where, to fast, missed it.

A well, we always have next year. Happy new year.

 

Thu, 01/03/2013 - 08:32 | Link to Comment Sheeple Shepard
Sheeple Shepard's picture

Buy the rumour, sell the news. Ad infinitum...er, bitches.

Thu, 01/03/2013 - 08:32 | Link to Comment Room 101
Room 101's picture

So what's new here?  The next econo-drama will be the so called debt ceiling. Who cares?  When the dance has been decided upon, all that remains is choreography.

How about some actionable information?

Here's something that might even prove useful to some of you: want to see how retail banking transactions are going to move away from the banks?  Look here.  Debit cards, bill paying, cash transfer, check cashing, ATM access, at thousands of "branches" across the country.  All at no-fee or close to it. 

https://bluebird.com/

Remember when the banks banded together to keep Walmart out?  It's payback, bitchez.

Thu, 01/03/2013 - 08:37 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

Don't be so sure. They'll loss leader it for awhile to get a bunch of people on board, then the fees will start to go up.

Thu, 01/03/2013 - 09:30 | Link to Comment Room 101
Room 101's picture

Maybe, but maybe not.  I think the deal here at least for AMEX is increasing their market penetration.  They've never been able to compete head to head with mastercard/visa.  Those who appear to be credit worthy will be offered credit cards and other services that AMEX is only too happy to provide.  When it comes to plastic, AMEX makes their money by shaking down merchants. Walmart just wants the same people to spend their money at Walmart. 

Note also that these accounts are NOT FDIC insured.  Interesting that it's happening outside the approved banking system.   

Thu, 01/03/2013 - 08:33 | Link to Comment negative rates
negative rates's picture

And behind curtain #2..........

Thu, 01/03/2013 - 08:42 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

It's Bush.....heh heh heh.

Thu, 01/03/2013 - 09:53 | Link to Comment negative rates
negative rates's picture

Which came first, the bush, or the garden of eden? hummm.

Thu, 01/03/2013 - 08:48 | Link to Comment jack stephan
jack stephan's picture

PFC Merriell 'Snafu' Shelton: [sitting and watching the other men scrubbing out drums] You assholes are gonna miss cleanin' out oil barrels pretty soon. You gonna be humpin' up some fuckin' hill...
[he lights a cigarette, despite being beside a 'no smoking' sign]
PFC Merriell 'Snafu' Shelton: ... or across a beach, Japs pourin' shit for fire, pissin' your pants, cryin' boo-hoo, wishin' you were back here with nothin' asked of you but to scrub oil outta drums.
Bill Leyden: [angrily] Why don't you grab a brush and give us a hand?
PFC Merriell 'Snafu' Shelton: Fuck that shit, I scrub drums for no man.

Thu, 01/03/2013 - 08:49 | Link to Comment tooriskytoinvest
tooriskytoinvest's picture

Roubini: The Longer-Term Picture Is Bleaker And The Next Crisis Could Be Just Two Months Away. The “Mini Deal” On The Fiscal Cliff Dodged All The Important Questions.

http://investmentwatchblog.com/roubini-the-longer-term-picture-is-bleaker-and-the-next-crisis-could-be-just-two-months-away-the-mini-deal-on-the-fiscal-cliff-dodged-all-the-important-questions/

Thu, 01/03/2013 - 08:54 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Do you mean to tell me we're just gonna have to turn around and do this crap......again?

 

Well dammit.....that sucks.

Thu, 01/03/2013 - 09:35 | Link to Comment boogerbently
boogerbently's picture

"Dr. Doom" has been touting a DOUBLE DIP since DOW 6500. (about 4 years now)

If you value your credibility, DON'T quote him again.

Thu, 01/03/2013 - 09:55 | Link to Comment SmoothCoolSmoke
SmoothCoolSmoke's picture

8:55.  I see no fade.

Thu, 01/03/2013 - 10:08 | Link to Comment dragoneyes74
dragoneyes74's picture

Here's the difference between the recent fiscal negotiations and the upcoming debt ceiling debacle: the recent ones had a faux deadline, meaning, if we breached it the politicians could have thrown around words like "retroactive" and "we're making progress" to tickle the taint of the stock market; whereas, the debt ceiling has a hard deadline when we can no longer pay our bills and priorities need to be set on who gets cut off.  Until proven otherwise I think it's wise to think history will repeat itself.  Last time the stock market didn't start selling off until aproximately 2 or 3 weeks before the hard deadline.  Gold rallied hard the prior month and a month afterward.  And the polticians negotiated until the last possible second.  My main concern is that gold and silver need to prove that they're no longer broken and can find a sustained bid thru this process.  Technically, the sequester deadline can be pushed off to be a "packaged deal" with the ceiling, which will unquestionably, no doubt, be raised.  The only question is to what degree will the GOP cave and how will the markets respond. I'm gonna stick with a repeat of history until proven otherwise.  

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