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Bizarro Time As Better Data Sends Stocks Lower
As the accelerating global currency wars, global money printing and abdication of fiscal policy on behalf of monetary policy becomes a worldwide pandemic, increasingly more markets are now trading like pennystocks, case in the point the world's second "deepest" stock market, the Nikkei225 has moved nearly 2000 points from high to low in the past two days on no actual news, while last night in particular was a complete embarrassment for anyone who still claims central banks aren't the only thing that moves markets: from up 3% to down 3% (under 14,000) following some "unexpected" comments from Kuroda, and finally closing up just barely, the entire move was tracing every squiggle in the USDJPY.
Then on to Europe where stock markets are now trading at their lows on the latest incarnation of bizarro day: it turns out the catalyst for the red stock market move and the sudden blow out in peripheral yields (, was the better than expected German IFO Business Climate print which came at 105.7, up from 104.4, and better than the expected 104.4. The "positive" surprise, which has moved the EURUSD to nearly 1.30, has turned out to be stock negative as it means the ECB is now less likely to cut rates even more, according to Morgan Stanley first and then all other penguins. As we said yesterday: all good news is now explicitly bad news if only for stocks, and Europe just figured this out. As for the peripheral bonds, we doubt the widening is due to a better German IFO and in all likelihood is driven by fears of what may and will happen once the Japanese carry trade, which has been the sole source of plunging PIIGS yields for the past 6months, finally unwinds: a moment which appears to be getting closer with every passing day.
Perhaps the best summary of the last two days comes from Deutsche's Jim Reid:
The last 36 hours have perhaps been evidence as to what might happen if stimulus is withdrawn before the global recovery has been cemented and what might happen if Japan makes mistakes along the way to their attempted new dawn. With the Chinese data still ambiguous, Europe still in recession, Japan in the very early stages of a growth experiment and with the US recovery still historically very weak one has to say that liquidity has been the main market fuel in recent months. So central banks have to tread carefully and the Fed tapering talk and the BoJ's seemingly benign neglect policy towards JGBs has had the market fretting.
Looking ahead at the US which will have a holiday shortened trading session, and where the carbon-based traders will be on their way to the Hamptons around lunchtime, the only data is Durable goods, but most importantly, there is no POMO today.
Here is SocGen's take on the main FX catalysts:
A much quieter session was observed in Japan overnight after US stocks squeezed off their lows and this should lead us into a fairly orderly session in Europe where the focus this morning will on the German IFOP survey for May. The Nikkei rebounded 0.9% into the close, after falling 3.4% at one point. Though the 14,000 level has been successfully defended, we may not yet have seen the tail end of this week's wobble. 10y JGB yields dropped 2bp after fluctuating in a 0.83%-0.91% range.
The consensus forecast for the German IFO calls for no change from April at 104.4, but the stronger manufacturing PMI published yesterday (49.0 vs 48.1) is cause for optimism. Conversely, a third successive decline would pour cold water on the upbeat monthly Bundesbank report released earlier in the week and would dampen hopes of an acceleration in Q2 GDP from 0.1% qoq in Q1. A stronger IFO does not make the EUR a buy but, after the rebound in EUR/USD above 1.2900 from the 1.2822 low, a weekly close at the highs would validate a short-term tactical switch for a chance to capitalise on a possible return to 1.3021 (200d ma). Trend line resistance above runs at 1.3135. USD bulls have been in command since mid-February and will have been emboldened by yesterday's weekly claims data, i.e. a drop in continuing claims to below the 3m mark (2.912m). This is the lowest level since March 2008 when the BLS unemployment rate stood at 5.1%. We are still over 2.5ppts away from that but the downtrend in continuing claims will inevitably get spirits up for the 7 June employment report. That may be too early to tempt the Fed to review its asset purchase programme but the bond market will not stand still. A 7bp rebound off the 1.96% intra-day low in UST 10y yields yesterday shows the bond market has decided not to downplay Bernanke's midweek comments and an attempt to move past the 3 March highs (2.08%) could be earmarked for next week as $99bn of supply looms (2y/5y/7y). US/EU 10y swaps look set to end the week at or above 50bp for the second week in a row.
Also on the agenda today are US durable goods orders and ECB weekly LTRO repayments. Paybacks in 3y funds have slowed to a trickle in recent weeks. A combined total of EUR1.124bn this week was the lowest combined total since the start of the repayments in February. A stronger IFO could ignite short-term paying interest in Eonias and swaps and add to the curve steepening bias observed yesterday.
* * *
And the remainder of Jim Reid's overnight recap:
Thursday's BoJ press briefing saw Kuroda suggesting that gains in yields could be expected as the economy improved. This was after previously saying that the BOJ was aiming to lower interest rates. This confusion accelerated the sell-off which helped lead to the 7.32% fall in the Nikkei on Thursday. This morning we initially saw calmer markets largely thanks to a relatively steady performance in the US session overnight. However after being positive for most of the session the Nikkei is dropping sharply into negative territory as we type this (now -2.5%). 10 year JGBs are more stable at 0.83% but did briefly touch 1% late yesterday. Speaking at a parliamentary session overnight in Tokyo, Japanese PM Shinzo Abe declined to comment on yesterday’s drop in Japanese equities and said he expects the BoJ to have appropriate communications with financial market participants. Shortly after, Kuroda said that the BoJ will continue with its efforts to end deflation and the BoJ will stablise the bond market with “flexible operations”.
Elsewhere in Asia, the Hang Seng (-0.2%), ASX 200 (-1.8%) and KOSPI (-0.1%) are also on a weaker footing in overnight trading. Asian credit markets are fairly quiet given a public holiday in Singapore. I don't think it’s in honour of my visit earlier this week.
As mentioned above, the US session prior to this saw a recovery from a weak open with the S&P 500 recovering throughout the day to close 0.9% off the opening lows and finishing -0.29%. Considering the overall volatility that preceded it the US market session was remarkably dull. Some of the ‘tapering’ fears were probably eased by comments from San Francisco Fed’s Williams where he told Bloomberg news that the Fed could step up the pace of QE again after tapering and that they won’t go on autopilot. St Louis Fed‘s Bullard said that the Fed was not "that close" to tapering QE, and noted that "even if we do taper it would still be a very aggressive pace of purchases because we would only be moderating by a small amount." Indeed as we said yesterday we do think QE or derivations thereof will be around for many years to come even if there is a possibility of slowing purchases in the near term.
Better US data perhaps also played its part yesterday in stabilising markets with initial jobless claims (340k v 345k) coming in stronger than estimates while the Markit US PMI Preliminary number (51.9 v 51.2) also topped market consensus. House prices and new home sales data were also better so all up US releases were certainly more encouraging than the Chinese and European prints that we’ve seen over the last 24 hours. Indeed, the Euroarea composite PMI rose by 0.8pts to 47.7, higher than consensus estimates of 47.2, but still firmly in contractionary territory. There was little cheer elsewhere as the French composite PMI was unchanged at 44.3, with manufacturing improving but services unchanged on the month. Germany’s flash composite PMI improved (up 0.8 points to 49.9), driven by both manufacturing (49.0 vs 48.5 expected) and services (49.8 vs 50.0 expected) indices. The Stoxx600 finished 2.1% lower in its first -2% move since July 2012.
Turning to today’s calendar, we look set to have a quieter day ahead of Memorial Day long weekend in the US and a probably wet bank holiday here in the UK on Monday. CME & CBOT interest rate and fx products close early today. In terms of data, the German IFO and US durable goods orders are the main prints.
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Sorry about that....a couple printers broke down.
Should be back up in an hour or so.....
No POMO today?
Gimme my debt binky!!!...waaaaahhhhhhh!!!
Don't worry, if it's not POMO-day it has to be a FOMO-day - so all will be well.
http://www.zerohedge.com/news/2013-05-07/fomo-new-pomo
Croser and croser.
http://www.youtube.com/watch?v=h08d803TAJ0
"....before you blow your top."
Well lately all of the so-called 'good news' has been proven to be either manipulation or outright lies. Maybe the market is finally getting wise...
How can good data be bad for the stock market, pundits keep telling us that in the chase for yield, stocks are the only place to be.
I just don't get these psychopaths.
Good news is bad because any hint that the money spigot may be turned off causes a negative reaction. Everyone knows it's being artificially inflated.
No one believes it because everyone by now realizes (or should have) that an MMT version of bond markets is what's inescapably implied in the printing.
So now what?
First hint: who is NOT printing to infinitum?
(oh, btw, unstoppable inflation is profusely-admitted to be the potential Achilles-Heel of any actual full-scale MMT implementation)
I can't imagine anything else they can do but keep printing.
Neither can they.
Sure, just take note that some aren't doing that, at least not to date, and so far don't intend to engage in the great MMT inflation experiment.
Place your bets Gentlemen.
Don't you think this is already pretty serious MMT implementation? Being the reserve currency seems to be holding velocity at bay somehow, I don't know it's like the money goes into a black hole somewhere.
Just the tip so far.
Not just somehwere:
http://www.zerohedge.com/news/2012-12-09/historic-inversion-shadow-banki...
It goes into deleveraging shadow banks ...
I don't think the reserve currency status is responsible so much as the profit seeking motivations of the finance sector and the US tax code. When the FED wasn't creating money fast enough (or a low enough cost) the Shadow Banking function grew to create new money at a low cost to the borrower through mechanisms profitable to the banks- which relies on assets captive within the balance sheets of the banks (i.e. basically 0 velocity). Current monetization (excess reserves) offsets that shadow banking deleveraging with new 0 velocity money to keep the house of cards propped up, as long as interest rates can be contained to prevent an exposition in competing demand for money from derivatives...
On top of that there shall be no talk of the debt ceiling from here on out.
Anyone who brings it up gets their phone records and emails sent straight to Obama's desk.
Nah, they'll just keep them in DOJ and tell Obama about it later- like after the 2014 elections.
Obama stole his playbook from Jon Corzine: What? What happened? Wow, that's news to me. I had nothing to do with it, now leave me alone.
Is there a POMO on Tuesday? If so that is bullish today.
Yup. Wake me up at 3:30
Here is the Japan market open commentary from Chump666
"This is beautiful to watch :10-yr JGBs to 0.845%. Here comes the stock dump again"
and here he is 2 hours later:
"CBs are nailing in supports. We going green. BTFD my a-hole, this is NY Fed and BoJ double teaming before Europe opens"
We may not have a one world currency yet but we have a global BTFD. "Central banks are nailing in supports".
Not much else to say until it all falls apart.
The only thing that can't go down is Ben the Dickhead's Ben Jones Industrial Average
In the end Benroid will out do Samson who slayed heaps upon heaps with the Jaw bone of an ass. Ben and his tribe will slay the entire world. May God make known to all their designs and cast them aside like a dirty pair of shit stained underwear.
This may indicate that market sentiment has peaked and it may be the beginning of a long downward trend in stocks.
Stop it. I'm getting all misty.
All I know is I decided to take the night off last night and had a beer and watched a ballgame. I wake up and see the Nikkei ended higher, so I assume they are finally getting things under control and our market looks like it may provide me with a wonderful opportunity to buy this am.
I almost miss the blue pill.
None too worry... according to all the rags the only problem is communication. Kuroda just needs a few days of immersive Central Bank Communications 101 and all will be well--Japan will stabilize and the coordinated debasements will resume to the benefit of all.
"what might happen if stimulus is withdrawn before the global recovery has been cemented" !?!
Mwaaaa ha ha ha ha haaaa!!
Friday funnies.
The recovery has cement shoes at the bottom of the Atlantic; just don't tell the relatives.
i am seeing red -nekki down 545 pts
why is red good? i am not involved!
how come i want this to go in the shitter?
cause i want others to wake up and lose their a$$?
no, because all i want is the market to work and do its job...
Free markets.....on hold since 2008.
There is nothing bizarro about this. The markets are going to crash no matter when the Fed stops raping and pillaging America and the world. So this communist manifesto of market manipulation may never end. These Fed Chairmanship around the world should be tried for treason!
Tyler said last night that it won't be until 2018 where the Fed owns all the treasuries. That is Moar than Foar Moar Years. Ultra bullish.
The world's governments and central banks are experimenting on the backs of ordinary people and as a result they are broke, unemployed, hungry and anxious. On the other hand the world's governments and central banks have succeeded so well in pumping up the stock markets and restoring bankers to their previous bonus highs.
These are not experiments aimed at recovery but experiments aimed at establishing how far people can be squeezed and stripped before they actually revolt at the unbalanced contribution which they are forced to bear so that others can still receive obscene pay packets, be shuffled to other positions when there is a problem and avoid jail for missing billions, when others are automatically incarcerated for the most trivial of offences.
There will be no recovery for almost a generation and even then it will not be a return to yesteryear's unsustainable paradigm.
WS is behaving like a true government agency. If the agency is efficient, it doesn't get as much funding (i.e. bailouts) next year, so good news is bad news,
Positive news at major tops.
Negative news at major bottoms.
Been this was since the dawn of the markets.
Bartiromo yesterday had people actually debating whether or not the markets were tethered to central bank actions.
I kid you not.
Maria Bartermojo ! There's mommentum in those thighs !
The problem is that the technicals are no longer the input into the system. The input is what is the Fed going to do based on the technicals and the Fed is using a sledge hammer as a tool so the market is very unstable.
The technicals show us sliding ever so gently under the waves and no one is sure if the Fed is going to abandon ship or tie themselves to a missile and launch in one last desperate attempt to keep from drowning...in debt.
You got to be having a laugh with this joke statement...
what might happen if stimulus is withdrawn before the global recovery has been cemented ????
The recovery was QE and nothing more ...
Manipulator's Data Credibility Faux Theatre .... this enigma lends credibility to their other bizarro shennanigans ! Monedas 1929 Comedy Jihad American Swagger Seed Corn World Tour