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Record DJIA Euphoria Persists In Eventless Overnight Session

Tyler Durden's picture





 

Unlike the session before, there has been little actionable news overnight, with the euphoria from the record high DJIA still translating into a buying panic, and forcing algos to buy futures because other algos are buying futures, and so on, simply because nothing says cheap like all time high prices (and forward multiples that are higher than 2007 levels). The one event so far was the Europe's second Q4 GDP estimate which came in as expected at -0.6%, the fifth consecutive decline in a row. More notable was that Q4 exports tumbled by 0.9% which was the biggest fall since Q1 2009. And while the news has served to keep the EURUSD in line and subdued ahead of tomorrow's ECB conference, the stock market buying panic has moved to European stocks which continue to ignore fundamentals, and are soaring, taking peripheral bond yields lower with them, despite ongoing lack of any clarity what happens in Italy as Bersani is ready to propose a government to parliament which is certain not to pass. But in a world in which fundamentals and reality have lost all significance, and in which only momentum and hope matter, we expect that risk will continue being bid in line with central bank balance sheet expansion until this tired 4 year old last recourse plan no longer works.

Speaking of central bank balance sheets, Credit Suisse Japan vice chairman and former Bank of Japan board member Atsushi Mizuno spoke in an interview in Tokyo on Haruhiko Kuroda’s prospects if confirmed as central bank governor. Mizuno said that he sees risk of bond-market bubble if BOJ purchases become excessive (which they will) and said that efforts by Kuroda to “do something new” may lapse with BOJ returning to current policy framework. "Increased bond buying would cause over-dependence on the BOJ and that’s not healthy for the market. I see the risk of a JGB bubble." Obviously, all his warnings fell on deaf ears and were otherwise ignored: all is fair in love and pushing the "wealth effect."

Today, Federal offices are closed in anticipation of a major snow storm, which may or may not complicate efforts to seasonally adjust this Friday's NFP number, of which we get the seasonally adjusted preview courtesy of the ADP private jobs number, which will send the DJIA high if good, and higher if bad. Consensus is for a +170K print.

Contrary to stocks, FX traders have had a very dull day, especially with the ongoing ES-EURUSD divergence getting deeper and deeper as all traditional correlation fall apart in the name of pursuing the stock market higher. From SocGen:

Currencies have been a fairly dull affair so far this week, at least in the G10 where all are trading within 0.8% vs the USD since last Friday. The Bank of Canada rate decision is not expected to cause any fireworks. Having raised the bar for higher rates at the last meeting, a reiteration of the more dovish stance should keep USD/CAD in the ascendency with resistance situated at 1.0342/63. Final eurozone Q412 GDP is not expected to bring a revision from the -0.6% qoq first estimate. Germany sells an additional EUR4bn 5y notes (previous b/c 1.90, average yield 0.68%).

A quick look at European markets:

  • Spanish 10Y yield down 4bps to 5%
  • Italian 10Y yield down 9bps to 4.65%
  • U.K. 10Y yield down 1bp to 1.96%
  • German 10Y yield up 1bp to 1.46%
  • Bund future up 0.06% to 145.11
  • BTP future up 0.61% to 110.26
  • Euro down 0.18% to $1.3029
  • Dollar Index up 0.12% to 82.18
  • Sterling spot down 0.25% to $1.5089
  • 1Yr euro cross currency basis swap unchanged at -21bps
  • Stoxx 600 up 0.1% to 294.39

DB's Jim Reid and his extended take of all that has happened in the past 24 hours.

There are little signs of any ailments affecting US stocks at the moment as the DOW last night (+0.89%) closed at its record high (14,254), eclipsing the previous high seen on 10th September 2007. Maybe I'll try QE on my shoulder! Given this record high overnight we thought we'd quickly detail how far the other major markets are from their record highs for comparison.

The S&P 500 is now -1.6% from its peak (Sept ’07) whilst in Europe, the UK FTSE is -7.2% from the highs (Dec ’99) while the DAX is -2.9% (July ’07). Peripheral Europe is faring much worse though. The IBEX is now only worth about half of what it was at its November 2007 peak whilst the FTSE MIB has taken roughly a 70% haircut from its all time highs in March 2000. The CAC is not doing that much better with current levels also being half of its peak in September 2000. Emerging market performance is mixed. China, Brazil, Russia and India peaked in Oct ‘07, May ‘08, Dec ‘07 and Nov ’10 respectively and they are now 62%, 24%, 25%, and 8% from their historical highs. We have to also mention that Japan is now only 30% of what it was back in the Dec 1989 heydays (ie -69% from the highs). So the world has seen fairly big divergences in recent years and the US is leading the pack in the recovery due to extraordinary levels of fiscal and monetary stimulus.

Some of the other markets may not pass their peaks for many, many years to come showing the stress that's still present elsewhere. Interesting times. Returning to yesterday’s US session, the buoyant mood was helped by strong gains in technology stocks including a 2.65% rise in Apple stocks. The tech-giant was said to be readying updates to the iPad and iPhone to be released in the spring and late summer respectively. Data-wise, the non-manufacturing ISM came in a touch better than expectations (56 vs 55) with DB’s Joe Lavorgna pointing out that it was the highest reading since February of last year. Importantly, the employment component of the report was little changed from last month's postrecession high (57.2 vs. 57.5) which bodes well for Friday's payrolls report.

Commodities had a fairly strong session too, with copper (+0.4%), brent (+1.4%) and platinum (+1.3%) seeing solid gains, boosted by the headlines from yesterday’s National People’s Congress in China.

Overnight in Asia, we’re seeing the second straight day of gains in equities. The standout performer in has been the Nikkei (+1.9 %) which has hit new YTD highs as the BoJ begins its two-day meeting today. The meeting will also be the last for
the current governor, Shirakawa, who will step down from his post in 2 weeks time.

Also in Japan, the NHK has reported that Samsung may invest JPY10bn in Sharp while Sharp would supply LCD panels to Samsung. The deal is also now 20% cheaper for Samsung since the October last year following the sharp decline in JPY against the Won. In China there are some more positive headlines as leaders meet at the National People’s Congress. The head of China’s National Development and Reform Commission said that the country has large scope to boost domestic demand and infrastructure investment underpinned by China’s urbanisation drive. Meanwhile, the PBoC’s deputy governor was quoted as saying that the yuan will be made more flexible but that it is very close to equilibrium. The Hang Seng (+1.0%) and Shanghai Composite (+1.1%) are pacing gains overnight. Elsewhere the UST 10yr yield has only risen 2bp over the last 24 hours to 1.90% as we type, showing some remarkable resilience to the risk rally that we are seeing now. In currencies, the AUDUSD is testing the 1.03 level (+0.3%) after the release of Q4 GDP which came in line with consensus at 0.6%qoq.

In terms of other news flow, it was announced that Venezuela’s President Hugo Chavez had passed away overnight after a battle with cancer. Vice President Maduro will serve as interim president until the next election which must be held within 30 days. In a national address in December last year, Chavez reportedly called on Venezuelans to unite behind Maduro as his successor. In terms of the market reaction, Venezuela’s 5yr CDS were marked several basis points wider as were the yields on the country’s 2027 bonds (Bloomberg) – although confirmation of Chavez's passing first hit the wires after most US markets had closed.

According to Moody’s, the death of Hugo Chavez will not have an immediate effect on Venezuela's sovereign rating but the political transition will be key to any possible rating changes.

Looking at the day’s data calendar, in the European timezone we have the second estimate of euro area Q4 GDP. In the US, January factory orders and the Fed’s Beige Book are scheduled. But the highlight will be the ADP employment report in the US which will help refine estimates for Friday’s payrolls.

 


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Wed, 03/06/2013 - 08:02 | Link to Comment mvsjcl
mvsjcl's picture

One hour and thirty minutes 'till gold smash-down!!!

Wed, 03/06/2013 - 08:04 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

It will go down in history as the greatest Kmart blue light special of all times.

Wed, 03/06/2013 - 08:25 | Link to Comment negative rates
negative rates's picture

There is nothing for momentum to fear, but fear itself.

Wed, 03/06/2013 - 08:52 | Link to Comment malikai
malikai's picture

Nikkei vs. USDJPY.. What's up with that?

Wed, 03/06/2013 - 09:37 | Link to Comment Bindar Dundat
Bindar Dundat's picture

Any business that can adjust its prices quickly can handle the coming hyper inflation.  The world is not ending gents , just changing.

 

Wed, 03/06/2013 - 08:06 | Link to Comment YuropeanImbecille
YuropeanImbecille's picture

Now is the time to buy! all time high prices, they will surely at least double or triple!

 

DOW 45.000 HERE WE COME!

Wed, 03/06/2013 - 08:04 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

Yep, the rally is certainly justified.....

  • GDP Growth: Then +2.5%; Now +1.6%
  • Regular Gas Price: Then $2.75; Now $3.73
  • Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
  • Americans On Food Stamps: Then 26.9 million; Now 47.69 million
  • Size of Fed's Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
  • US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
  • US Deficit (LTM): Then $97 billion; Now $975.6 billion
  • Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion

Wed, 03/06/2013 - 08:19 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Glass half full.....always look on the bright side of life.

http://www.youtube.com/watch?v=WlBiLNN1NhQ

Wed, 03/06/2013 - 08:22 | Link to Comment Sudden Debt
Sudden Debt's picture

 

 

And yet... lemmings are still buying into this crap...

 

Some people learn by reading a book

A few people learn by experience...

And MOST people learn by touching the electric fence...

and than... there's those who keep on touching the electric fence... over and over again untill they crap their pants...

...

 

Wed, 03/06/2013 - 09:26 | Link to Comment malikai
malikai's picture

Some of us also learn by watching closely those who touch the electric fence.

Wed, 03/06/2013 - 08:34 | Link to Comment Peter Pan
Peter Pan's picture

You forgot one more statistic......

Bankers jailed then....nil
Bankers jailed now....nil

Thank God that sector is stable.

Wed, 03/06/2013 - 08:13 | Link to Comment sudzee
sudzee's picture

The Dow is the new "safe haven" says CNBC.

Wed, 03/06/2013 - 08:16 | Link to Comment Sudden Debt
Sudden Debt's picture

The reason is so funny :)

LOW RATES AND LOW INFLATION CAN FUEL THE DOW TO ANOTHER 100% GAIN IN THE NEXT 2 YEARS!!

 

yeah... right....

as long as we're not talking about the bond bubble...

and as long as we're willing to believe that inflation is low...

 

Wed, 03/06/2013 - 08:16 | Link to Comment goldbear1974
goldbear1974's picture

gold:silver ratio ready to plunge from current 55:1 to 41:1 in next 5 months

Wed, 03/06/2013 - 08:20 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Gonna cut me a check if it doesn't?

Wed, 03/06/2013 - 08:23 | Link to Comment Sudden Debt
Sudden Debt's picture

he's just talking ratio's.

The ratio could even crash to 1:1 where gold is at 10000$ and silver is also at 10000$

 

Wed, 03/06/2013 - 08:32 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

It would go against nature....but anything is possible I suppose.

 

I wonder what rhodium would do in such an environment?

Wed, 03/06/2013 - 08:17 | Link to Comment ParaZite
ParaZite's picture

Ok, for all of my friends out there shitting themselves with greed over the stock market moves yesterday, let me explain it in terms even an infant can understand. The dow was at 7000 in 2009. We printed and printed and printed until our money buys almost 1/2 of what it did in 2009. 7000 times 2 equals 14000. Nothing has changed, other than the fact that our currency is worth less than it was in 2009. It's a fairly simple concept. Gold was at 870.00 an ounce in 2009. Gold price predictions for 2013 sets gold at 1600 to 1700. 800 an ounce times 2 equals 1600. It's not that hard of a concept to grasp.

Wed, 03/06/2013 - 08:18 | Link to Comment Headbanger
Headbanger's picture

Monkey see, monkey do.

Wed, 03/06/2013 - 09:52 | Link to Comment CvlDobd
CvlDobd's picture

Don't think, just buy.

 

"If you think, you're dead."

-Maverick-

Wed, 03/06/2013 - 08:19 | Link to Comment Son of Loki
Son of Loki's picture

"Eventless?"  Not exactly. Justin Bieper is not happy with his birthday party. That's making headlines across the (Western) world. How can ZH miss that?

Wed, 03/06/2013 - 08:26 | Link to Comment Sudden Debt
Sudden Debt's picture

that kid walks like a monkey. When I was young, I had cool idiols : Rambo, Swarzi....

now the idiols look like monkey's and look like they still suck momey's tits every night...

WHAT THE FUCK IS WRONG WITH THIS YOUNG GENERATION?!

Wed, 03/06/2013 - 08:35 | Link to Comment gold-is-not-dead
gold-is-not-dead's picture

_

Wed, 03/06/2013 - 08:53 | Link to Comment negative rates
negative rates's picture

You need to have tits to get positive results from cocaine, the rest is just business in the front, and a party in the back.

Wed, 03/06/2013 - 08:30 | Link to Comment gold-is-not-dead
gold-is-not-dead's picture

Justin Bieber?! What's the symbol for it - JB?

Wed, 03/06/2013 - 09:19 | Link to Comment Zymurguy
Zymurguy's picture

No, it's DORK

Wed, 03/06/2013 - 08:32 | Link to Comment Grand Supercycle
Grand Supercycle's picture

SPX daily chart shows megaphone wedge so another big move awaits.

 

trader618

Wed, 03/06/2013 - 08:56 | Link to Comment razorthin
razorthin's picture

What the fukk are you talking about?

Wed, 03/06/2013 - 08:36 | Link to Comment Albertarocks
Albertarocks's picture

"nothing says cheap like all time high prices"

What a great line.  But I'm wondering why it immediately made me think of another great line... "Nothing says "Obey me" like a bloody head on a fence post."  Maybe it's because both those lines are the result of living within a tyranny.

Wed, 03/06/2013 - 09:08 | Link to Comment ekm
ekm's picture

This is what DOW price is:

 

When you have an old vase at home and want to do a garage sale, what do you do? You do not know the price since there's no liquid market of old vases.

 

Answer: You simply think of a price and put a sticker on the vase, let's say $50. But next day you change your mind, you know, $60. Ah, no,no $70. It makes no difference, you own the vase.

 

Same with DOW. The Gov-Fed owns the Dow. It is not for sale. They simply put a sticker on it. Today 15000, tomorrow 17000, next month 21000. It makes no difference. There's no trading.

 

Talking about gold being an old relic? Hah, DOW IS AN OLD RELIC.

Wed, 03/06/2013 - 09:18 | Link to Comment Zymurguy
Zymurguy's picture

I'm sure there's a majorly fudged upward adjustment coming from ADP... the fix is in and we didn't get the memo.

Wed, 03/06/2013 - 09:24 | Link to Comment thismarketisrigged
thismarketisrigged's picture

i woke up today and saw futures up 56 pts. i must say i was shocked.

 

isnt it ironic how whenever we have a rare red day, no matter how bad the news is, the following day we r green regardless, but when we have a big green day, we just continue going higher, no pullbacks whatsoever.

 

also, who the fuck is buying google at these fucking prices. ive never seen a stock that only a few months ago quarter 3 had a horrific earnings report, and now its gone in straight line up from 650 to 840 and counting. fuck google, fuck the fed, fuck wall st. die bitches.

Wed, 03/06/2013 - 10:25 | Link to Comment Zymurguy
Zymurguy's picture

Google = Govt. Entity

Govt. needs to pour money into the economy via this conduit.

Wed, 03/06/2013 - 09:45 | Link to Comment MFLTucson
MFLTucson's picture

The Great American con game!

Wed, 03/06/2013 - 09:49 | Link to Comment yogibear
yogibear's picture

"i woke up today and saw futures up 56 pts. i must say i was shocked."

That's the idea. The Algos at Goldman and JPM are playing people that are short.

Everyone is waiting for a drop. They will do the opposite.

Plenty of banks with Bernanke money sloshing around so it has to go somewhere. 

More and more Federal Reserve money being put where it's gona make the most. 

More and more Fed  money coming in.

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