Sea Of Red

Tyler Durden's picture

In the brief but tempestuous fight between Abe and the "deflation monster", the latter is now victoriously romping through an irradiated Tokyo, if last night's epic (ongoing) collapse in the Nikkei is any indication: down 6.4%, crushing anyone who listened to Goldman's "buy Nikkei" recommendation which has now been stopped out at a major loss in three days, and now well in bear-market territory, it would appear that a neurotic Mrs. Watanabe is finally with done with daytrading the Pennikkeistock market, and demands Shirakawa's deflationary, triumphal return to finally clam the market. Only this time the Japan's selling tsunami is finally starting to spill, if not to the US just yet (it will) then certainly to Asia, where the Shanghai Composite which was down 2.7%, and is once again well down for the year, and virtually all other Asian stock markets. Except for Pakistan - the Karachi Stock Exchange is an island of stability in the Asian sea of red.

... As is Italy.

RanSquawk summarizes it best: broad based risk off sentiment was observed in Europe this morning, after the Nikkei 225 index over in Japan officially moved into bear market territory and officials at the World Bank slashed global and China's growth forecasts. As a result, the positive correlation between the Nikkei 225 index and USD/JPY saw the major pair decline over 200pips to trade at levels not seen since early April. However, even though the spot rate remained under pressure, the implied vols surged to 2y high which indicates that the sell-off may now be viewed as a buying opportunity. Technically, major support level is seen at 93.57 which is the 38.2% retracement of the September to May rally.

Looking elsewhere, Italian Treasury successfully tapped markets this morning and sold just shy of €5 billion planned in BTPs. Still, the risk off sentiment ensured that peripheral bond yield spreads with respect to the benchmark German Bund remained wider. Going forward, market participants will get to digest the release of the latest Retail Sales report, as well as the weekly jobs data.

SocGen's macro update confirms more of the same:

Risk aversion is back today, as investors turn concerned about the Fed exit and the success of the Abenomics. JPY and CHF are the best performers on the FX, while USD and EM currencies are hardly hit.

Will US retail sales reassure today? Consensus is for a 0.4% increase. A positive economic surprise could revive selling pressure on 10Y Treasuries. However, 2.23% must be fully cleared to catch a glimpse of 2.40% and see dollar buying rekindle.

As far as EUR/USD is concerned, we continue to think that the EUR/USD's current upside will not last. Should global risk aversion continue, the USD would have to benefit at the end of the day: the BoJ and the SNB will not accept that the JPY and the CHF recover their safe haven status.

Moreover turning to the EUR, the ECB's surplus liquidity reserves have been falling on a regular basis for a while now, and European banks have continued to reimburse the two 3-year LTROs: to date, they have reimbursed 40% of the amounts borrowed. This may have contributed to the EUR's current resilience of late. Indeed, the reduction in surplus liquidity has mechanically hardened monetary conditions.

Nevertheless, while this likely will hinder the ECB in its ultra-accommodative monetary policy, the ECB does have room for manoeuvre. Although President Draghi last week indicated that no urgent action was needed, which is also underpinning the EUR, but he stated that the bank has several instruments at its disposal and that they are easy to implement. In short, the ECB is still considering using them. SG economists project that the ECB will go ahead with new accommodative monetary measures by the end of 2013: they expect a further 25bp decline in the repo rate and do not exclude more non conventional measures.

* * *

All the bulletin points that's fit to print, courtesy of Bloomberg's DayBook:

  • Treasuries gain as Nikkei slides into bear market territory, leading global stocks lower, as JPY strengthens past 94; Japanese investors were net sellers of foreign bonds for a fourth week.
  • Emerging markets from Brazil to India took steps to stem an outflow of capital as concern mounts that developed nations are approaching the beginning of the end unprecedented liquidity
  • More than $2.5t has been erased from the value of global equities since Bernanke said May 22 that the Fed could scale back QE should the job market show “sustainable improvement”; the BoJ left its stimulus unchanged at June 11 meeting
  • Reserve Bank of New Zealand left its official cash rate at  2.5%, said kiwi remains overvalued; Bank of Korea left its benchmark rate unchanged at 2.5%
  • BoJ’s Kuroda said Japan’s real economy is recovering steadily, signaled confidence markets would recover
  • The World Bank cut its global growth forecast for this year after emerging markets from China to Brazil slowed more than projected, while budget cuts and slumping investor confidence deepened Europe’s contraction
  • Canada and the U.K. are seeking to galvanize an austerity alliance within the G-8 amid mounting pressure to ease up on the spending-cut strategy
  • Treasury 30Y bonds to be sold today yield 3.335% in WI trading; stopout yield at that level would be highest since March 2012; 10Y notes sold yesterday awarded at 2.209%, highest since Oct. 2011, tailing 1pm level by 0.1bps-0.2bps; 2.53 bid-to-cover lowest since Aug. while indirects surged
  • Sovereign yields mostly lower. Asian and European stock markets, U.S. equity index futures slide, WTI crude, metals lower

Finally, DB's Jim Reid with the usual recap of all other major and non-major overnight events:

A bleak month for Japanese equities has just become bleaker with large declines seen in the Nikkei and TOPIX overnight. The overnight declines have been broad based with all but one constituent in the Nikkei trading lower. By sector, declines have been led by Retail, Automakers and Consumer Finance stocks. At the same time, dollar yen has broken through the 95 level to a 2-month low of 94.5. Since hitting 103.2 in mid-May, the yen has strengthened by more than 8% against the USD. Overnight flow data from the Japanese Ministry of Finance showed continued selling of foreign assets by Japanese investors for a fourth straight week. Domestic money managers sold a net JPY387bn yen of foreign debt and a net JPY222bn of foreign equities for the week ended June 7th. On a slightly better note, JGBs are firmer across the curve with 10yr yields having their best day in more than two months (-8bp as we type). Having played down the recent volatility in Japanese markets, the BoJ said that Governor Kuroda will meet with PM Abe later today to discuss recent moves in the yen and stock markets. It is unknown at this stage if there will be an official statement following the meeting.

Elsewhere in Asia, the temporary respite in emerging markets has been rather short-lived. The Asian IG credit index is currently marked 12bp wider at 153bp and sovereign CDS such as China and Korea are marked about 8-9bp wider. Meanwhile in Asian equities, the Hang Seng (-2.6%) and KOSPI (-1.0%) are both nursing losses, partly in concert with the declines seen in Japanese equities. Mainland Chinese equities are down 2-3% in their first trading session since last Friday and are in part reacting to the weaker-than-expected trade numbers which were released last weekend. In currencies, the Indian Rupee is 0.7% weaker against the USD, despite news that the RBI had intervened in the FX market in recent days to support the currency after it record lows against the dollar on Tuesday.

Returning to yesterday, a strong start to the European trading session failed to carry through to the market close (Stoxx600 -0.36%). Some of yesterday’s late selloff was attributed to talk of a “no confidence” vote in Greece. Greece’s government came under some pressure from junior coalition members in the Pasok and Democratic Left parties following public anger over the sudden closure of the Hellenic Broadcasting Corporation (ERT) on Tuesday night. According to Reuters, ERT had a combined audience share of 13%. PM Samaras described the closure as a necessary process before a relaunch of the broadcaster in a slimmed-down form later this year. A number of Greek labour unions have planned a protest in the Greek capital today to voice out against the closure. Greece's ASE Index fell 3.2% after the country became the first developed nation cut to emerging-market status by MSCI Inc. In other changes announced by MSCI, Qatar and the United Arab Emirates were raised to emerging markets, while Morocco was cut to a frontier market.

Across the Atlantic, we had an interesting day where we saw weakness in both equities and fixed income. Indeed, the S&P500 closed 0.8% weaker, while 10yr USTs added 4bp to close at 14mth highs. Some of the weakness in USTs came after soft demand at a 10yr treasury auction where the bid-to-cover of 2.53x was the lowest in 10 months. There was also data showing that outflows from US long-term mutual funds were $11.5bn for the week ending June 5th, of which US bond funds saw outflows of $10.93bn. The last time fund outflows reached a similar figure was in early October 2012. Indeed, bond fund flows remain highly topical given the recent move in rates and follows findings last week that investors had pulled a record $12.53bn from bond funds tracked by EPFR Global for the week ended Wednesday June 5th. In other markets, the dollar index (-0.3%) continued its decline from YTD peaks and credit markets finished weaker (CDX IG +2bp) amidst the move higher in rates.

Turning to the day ahead, US retail sales, business inventories and initial jobless claims are likely to be the main focus of a sparsely populated data docket. In terms of retail sales, DB is forecasting gains of +0.3% across both the headline and ex-auto sales. It’s also worth watching today’s 30yr UST auction following yesterday’s lacklustre 10yr sale.

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EvlTheCat's picture

Queue the Godzilla music.

Bay of Pigs's picture

Fired for being "too aggressive"? Is that a joke? The man did nothing to stop the banks.

I see his replacement is a Harvard alum and ex Goldman employee. LOL....some improvement. What bullshit.

Smuckers's picture

Godzilla has already left.  He doesn't like to play in just ashes.

Paper CRUSHer's picture




The Enterprise was passing the solar system when starfleet alerted us to a faint primitive radio distress signal emanating from the eastern region of the third planet......

KIRK:"Get a fix on the transmission source Uhura" 

UHURA:"Captian,the radio signal seems to primarily coming from the east.....location fixed.....Tokyo,Japan"


UHURA:"Sir,i'm running it through the universal translator"

KIRK:"What do you make of it Spock?"

SPOCK:"Fascinating.......Captain, the central japanese authorities report they're no longer in control of their financial markets,they have promised to devalue the yen for some time by doubling the monetary base in attempt to restart the economy and to kill the deflation plaguing they're entire continent.

 KIRK:"Deflation?...........put in on main viewer Sulu"

KIRK:"AMAZING................Absolutely amazing Spock"

SPOCK"Yes......although highly illogical,Captain, in a futile attempt to cause inflation by risking extreme money printing the BOJ and MOF have failed they're intended mission and have now lost all crediblity",

KIRK:"McCOY,they've done the unthinkable.......... they've attemped The_Corbomite_Maneuver straight out of my playbook.... Bones"

McCOY:"Dammit Jim i'm a doctor not banker"

ENSIGN:"Captain ,may i suggest the following,if we beam down a quadrillion yen in paper currency would that not cause the price level to rise"

KIRK:"That may be a long shot,........Scotty have transporter standby and beam down one quadrillion yen in bills"

SPOCK:"Captian....the Enterprise may not have sufficient power to print one quadrillion yen in paper bills even if we divert all auxillary power to transporter bay.May i make an alternative suggestion, if we link the ships main computer with the BOJ's we could theoretically print unlimited amounts electronically"


KIRK:"SCOTTY.....delay that order"

SCOTTY:"Aye Captain"

KIRK:"Dammit......SCOTTY,have transporter beam up the entire crew of the BOJ  directly to sickbay"


NoDebt's picture

Japan is running the Kobayashi Maru scenario on themselves.

Sudden Debt's picture

I read it... and I could hear the voices from the original crew in my head... MARVELOUS!!!



besides that fucker who keeps telling me to burn down the building... but I can handle him... for now...

Zero Point's picture

Just burn it.

We need some more broken windows.

Headbanger's picture

That is so facking great! Thanks and live long & prosper!

Oldballplayer's picture

The term is "belay", not "delay."

Youri Carma's picture

OK, we got conformation: The situation is getting worse.

World Bank: Worst risks to recovery are past

Employers post fewer job openings but quits increase

Ahaahahahaah Which is a good sign according to Reuters LOlz

“The number of job openings fell in April but more workers quit their jobs during the month, a potential sign of confidence in the nation’s plodding labor market recovery.”

GetZeeGold's picture



Wow....didn't see it coming.


Gonna need to hire some doctors soon....but they're only going to be able to afford to pay you in peanuts. Everyone line up for your student loans.

kchrisc's picture

(Reuters) - The number of job openings fell in April but more workers quit their jobs during the month, a potential sign of confidence in the nation's plodding labor market recovery.



fonzannoon's picture

I was bangin the drum to buy karachi stocks all day yesterday.

firstdivision's picture

Apparently the new "flight to safety" is Pakistan.

GetZeeGold's picture



Flying over Pakistan is pretty's just when you're on the ground that you have to worry.

Oldballplayer's picture

As long as you are higher than 10,000 feet. It can get dicey below that.

El Oregonian's picture

Pakistan? You mean the Poppy Fields in Afghanistan don't you? Hey, if it's good enough for the CIA's bottom line it's good enough for these criminals, It's good enough for... er... wait, again.

youngman's picture

They make a pretty good AK-47 out of scraps.....and dance pretty at the border crossing with Turkey

taitamco's picture

Pakistan and ...Mongolia :)

highwaytoserfdom's picture

hey Karachie is up...  Perhaps the broken window and violence for freedom might be in play.   The exceptional freedom for drones has a country where they feel safer....

Youri Carma's picture

Those drones also keeps the foreigners out wich actually helps the economy (Ask the Greeks).

max2205's picture

Ben has your bid

disabledvet's picture

that dollar will remain "weak" (as part of the over all basket of currencies) probably forever. are we starting to finally "in source" jobs as a consequence? we'll see if Cooper Tire offers a prelude of what's to come. (optimistic take.) what isn't written here is how much the entirety of East Asia is/has been a source of liquidity for Wall Street and London. As those REIT's over there start crumbling that source of liquidity is drying up. it could dry up VERY quickly if we're talking about a collapse of the totality of the East Asian "residential model" of building tall. not a short seller but certainly understand they exist...but if you're primary source of global liquidity is drying up that explains to me both the lack of volume on the Street AND the short squeezes going on everywhere even though the US economy continues to just "muddle through" and nothing more. obviously this is MASSIVELY deflationary on the asset side (the collapse in US housing from 2008 is now going global) but we'll just have to wait and see how significant the "pass through" is to the equity space. the New England/DC model has always been about retail to solve these problems (the New York model doesn't create any fact it kills them) so that's one area i would focus on in any major sell off...especially if we're talking 40% downside which is what i'm looking for here.

VanillaSkyGuy's picture

40% down side where?

resurger's picture

The monster is a fucking Terrorist

OpTwoMistic's picture

I have found doing th opposite of goldmansuks is profitable.

PaperBear's picture

Gold and silver lifeboats still available.

El Hosel's picture

... All the Bigest Ponzi "Markets"  US  and Japan would look and feel a whole lot better with a couple more weeks of topping action. The US would have a very fitting and very Ugly double top with just a bit more "fixing". The boyz can start their "US flight to quality" campaign now that the JPMBernanke call ( of a few days ago) for Emerging Market selloff came through like the Magic that it is. I can see the headlines now, Goldiloks rides the Ponzi Pipe to another all time high..... Swan dive to follow.

francis_sawyer's picture

Oh great... I fucking wake up & Moses is on the screen... What's on tap for tomorrow?... Chariot Races?...

EclecticParrot's picture

My guess:  it'll be:    "Let me then tow to pieces, while still chasing thee, though tied to thee, thou damned whale! Thus, I give up the spear!"   (Though, of course, a clever ZH employee will superimpose a finance minister's face over Ahab's)

francis_sawyer's picture

Well fuck me man... I mean ~ the least ZH could do is use Bread Helmet dude every once in awhile to get my day started with a smile...


francis_sawyer makes comments all the time about mathematical impossibilities & power node asymmetries... So what happens after:

- a bunch of hacks pepper the comment section with a bug up their ass about bashing an entire RELIGION

- so francis_sawyer replies... IT.HAS.NOTHING.TO.DO.WITH.RELIGION. [my observations are statistical & are a study of human 'character', NOT 'religion']

- I further go on to explain the hithers & whys about how 'religion is just an opiate for the masses' [confirming my disdain for religions in general & across the board]

- so what happens next?

- the biggest RELIGIOUS figure of all time becomes the artwork [artwork, which, ostensibly is used for the purpose of drawing eyes & attention, like pole dancing superheroes], for a comment thread


You fucking can't make this shit up...

EclecticParrot's picture

Atheism is a form of humanism and, as such, is admirable, miles apart from the assumed negative, narcissistic nihilism assume by many.  At the same time, it's inherently anti-dogmatic, so it's surprising that so many adherents become offended at religious symbolism, and more than one should be offended at drawings of the tooth fairy.  That is not dismiss or make cartoons of the deeply held beliefs of the 95 % believers in this country, but it seems to me (and not to accuse you per say) that militant atheists, who want to proselytize,  are missing the point.  While I believe it presents a more positive view of the world as a wonder, I feel no need to convert others, and actually own over 200 of Bach cantatas, as much of the word's best art works had religious origins.  It's simply a mode of understanding some adopt in a difficult, complex world, which is in some ways quite understandable.

francis_sawyer's picture

For the record ~ I'm not an 'atheist' either...



EclecticParrot's picture

Splendid.  As for me, I'm the nicest little atheist you'll ever meet.  Now, the markets are open, no time for religion :)

francis_sawyer's picture

There is no market either... There is only the Bernank... [but carry on ~ nice doing business with you]... ;-)

mayhem_korner's picture



The suggestion that atheism is anti-dogmatic is irreconcilable with human nature.  There are too many questions about which each of us is insatiably curious and that each of us satisfies on the basis of some beliefs.  In the eyes of others who are not persuaded similarly, those beliefs amount to dogma.  Irrespective of where truth resides, to suggest that atheism is anti-dogmatic is illusory.

EclecticParrot's picture

Methinks you're confusing 'beliefs' with dogma, defined as follows:  a principle or set of principles laid down by an authority as incontrovertibly true. It serves as part of the primary basis of an ideology or belief system.  Thus, atheism isn't a dogmatic anti-belief with a list of 10 commandments, but a non-belief in specific authoritarian, dogmatic philophies that include a personal deity.  Don't confuse famous 'atheists' who insult priests, write books or construct 'churches' with your garden variety atheist.  In fact, it's precisely your confusion (not meant as an insult given your thoughtful answer) that lies at the heart of the spirit of my reply:  that an atheist publicly complaining about religious symbols is perhaps missing the point.  In other words, don't fear the Easter Bunny, as the illusions, if they indeed are illusions, of others, can't impact you.  I guess I view atheists as inherently self-sufficient, intellectually curious, laid back and less prickly regarding these matters, but perhaps that's my illusion :)

mayhem_korner's picture



You have affirmed that I am not confused at all.  Apparently you do not see the contradiction embedded in your post. I made no mention of "famous" atheists as you call them - those stem from your own presumption about what underlies what I said.  It's not been my experience that "militant" atheists are those who overtly question so-called "other" religions, but rather the ones who defend their atheism against the perception of attacks that in fact have not been advanced.  If you are convinced that the last sentence of your last post is NOT a passive-aggressive, militant defense of dogma, then you are bound to forever reside in defense of your own version of nirvana.

EclecticParrot's picture

Nope, no contradiction whatsoever, as it appears you've glossed over the key portion of the post:  Principles laid down by an authority as incontrovertibly true.  Your notion that those disagreeing with atheists may view their "beliefs" as dogma may be true, but would be technically incorrect on their part, given it is a lack of belief in specific authoritarian doctrines, which are normally a key facet of any religion.

The last sentence had no passive-aggressiveness, but was instead an attempt to point out to 'aggressive' atheists their actions seem unecessary, and somewhat contradictory,  given their non-authoritarian (and, therefore, non-dogmatic) stance.  In fact, I was attempting to describe, and therefore agree with, your definition of atheistic 'militancy.' railing against perceived attacks.  Without dogma, no need to be "prickly", no need to defend -- that was the point.  Atheism with a smile and a shrug of the shoulders, not a scowl, is a style, not a principle, not a dogma.   Hence, there was nothing for me to defend.

mayhem_korner's picture



Nope, no contradiction whatsoever  As I said, you do not see it, because you do not recognize that atheism is a religion (it is) - and yet you state its doctrine (look hard at your post, it's right in there).  You are claiming that because atheism has no "authoritarian doctrine," it therefore is not dogma.  You are merely playing sleight-of-hand with words.  Just as considered acceptance of "authoritarian doctrine" is dogmatic, so is considered rejection of the same.  But to allow yourself to claim the high ground of being anti-dogmatic, you simply skirt the issue by stating that atheism has no doctine.  Convenient but completely illusory.

The last sentence had no passive-aggressiveness  News flash: you do not get to handicap your own actions.  In my view, you come across as militantly passive aggressive.  That is the primary purpose of your self-attributions of "smile and shrug", "easy going", etc.  You are implying that others are prickly, not easy going, not smiling, etc.  Why else would you repeatedly defend your supposed carefree demeanor - which no one questioned - other than to call it out as a differentiation?

It must be good to be "self-sufficient"; it surely is not "anti-dogmatic".  Good luck in discerning what the mirror is reflecting.

EclecticParrot's picture

It must be clear to most by now that I've been looking through a 1-way mirror, easily discerning your folly, while in your incessant preening you're blinded by your own reflection.  No need for suspects to step forward one by one for identification, as you've convicted yourself.

Just as I can't (and didn't attempt to) 'handicap' my own actions, you don't get to squirm through the wormhole and emerge unscathed -- in fact the event horizon has crushed you and scattered you, but in the process, thankfully, all the elements are even more easily identifited.  

There's quite a difference between 'sleight-of-hand' and ignorance, and it's precisely you who are attempting the former but proving the latter -- you can't reinvent the definition of 'dogma', which DOES require 'handed down by an authority as incontrovertibly true', the absence of which is NOT a form of dogma, but an anti-dogma.  While there may be some who embrace a religious form of atheism, with texts and holymen, my post was clearly in a different camp, the specific purpose of which was to contrast the public charicatures with the 'garden variety.'  In railing against our paranoia from non-existent attacks, your failed attempt to draw free-thinkers into a hoven of sacraments is a 'passive-agressive' form of attack ('well, they think they're so high-minded and superior, but the fools can't see they're a religion too!"). 

Enjoy the view (and remember the reflection you're looking past is the opposite we're seeing, with the right and left [and wrong] flipped 'round).

taitamco's picture

For information, in the middle of the Sea of Red, the Top 20 Index of the Mongolia Stock Exchange (in Ulaanbaatar) closed the day at +1.25%.

I know it's small and exotic but for contrarian minds, it's worth noticing and for the most courageous may be worth practicing!

To be fair, for a remote market of that size, it's not too crazy, but still requires a bit of ...P.A.T.I.E.N.C.E. 

JustObserving's picture

Expect US markets to go green any minute now.  And Dow will probably close over 15,100 today.  Japan down 6.35% and Dow futures down 0.2%? Manipulated markets never make sense.