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Complete Recap Of Overnight's Volatile Markets

Tyler Durden's picture





 

If yesterday's price action in the moments following (and preceding) the FOMC announcement was just a little suspicious, with a seemingly endless supply of VIX selling originating as if from nowhere (or perhaps the 9th floor of Liberty 33) the morning after has so far been a snoozer. Perhaps this is to be expected following the third biggest one-day surge in the stock market in the year (1st =  Jan 2nd, 2nd = October 10th), or perhaps the market is finally focusing on Bernanke's tongue in cheek suggestion that the taper may be lowered by $10 billion per month (we disagree as described previously). Or perhaps the creep higher in 10 Year yields, at 2.915% at last check and just shy of the 3.00% psychological level, is finally being noticed. Or perhaps the fact that China, very surprisingly, is also tapering concurrently is finally being appreciated as is the fact that despite all talk of preparedness, developing economies were hardly left unscathed following yesterday's development. Whatever the reason, the euphoria this morning has "tapered."

Here is where we stand currently, thanks to RanSquawk:

Stocks in Europe trade in positive territory after the Nikkei 225 printed a 6 year high following the Fed’s modest taper. Following this spot gold has been put under pressure as it’s demand as an inflation hedge falls and is currently trading just above the USD 1200/oz level, with prices not seen below this level since late June/early July and the YTD low at USD 1180.57/oz.

Elsewhere, following the 3 Month SHIBOR Interest rate fix at 5.4239% vs. Prev. 5.3850% and Chinese overnight 1-year interest rate swaps hitting a record high, the PBOC have injected liquidity via a short-term operation in an attempt to provide credit to banks. This follows concerns from the central bank wishing to avoid the liquidity issues seen in June.

Finally, the Euribor strip has continued to bull flatten as contracts continue to pull away from December lows as traders continue to eye a temporary pause in the ECB LTRO. The Eurodollar curve has bear steepened following yesterday’s decision by the Fed to taper, whilst the Short-Sterling strip has continued to weigh from yesterday’s lower than anticipated unemployment figure from the UK.

Overnight highlights from Ran and Bloomberg:

  • The USD 10bln taper (USD 5bln in each of Treasuries and MBS) was largely deemed non-aggressive and priced-in following last week's sell-off in equities; stocks in Europe trade in positive territory after the Nikkei 225 printed a 6 year high following the Fed’s modest taper.
  • The PBOC have injected liquidity via a short-term operation in an attempt to provide credit to banks after the 1-year interest rate swaps hit a record high.
  • The Euribor strip has continued to bull flatten as contracts continue to pull away from December lows as traders continue to eye a temporary pause in the ECB LTRO.
  • Looking ahead there is the release of US weekly jobless data, Philadelphia Fed Business Outlook, Existing Home sales, 5y TIPS and 7y note auction.
  • Treasury yield curves flatten in partial unwind of bear steepening seen after Fed yesterday trimmed pace of QE purchases and said rates would stay exceptionally low until “well past the time” the jobless rate falls below 6.5%.
  • Week’s auctions conclude with $16b 5Y TIPS and $298b 7Y notes, yield 2.310% in WI trading; 5Y notes sold yesterday tailed 1pm WI level, with indirects lowest since Dec. 2008
  • Global banking regulators scaled back plans to boost capital requirements for banks holding asset-backed securities after lenders warned that an initial blueprint was too harsh and would have curtailed lending
  • China added funds to selected banks today after the benchmark money-market rate jumped the most since a record cash crunch in June
  • New Zealand’s economic growth accelerated to the fastest pace in almost four years in the 3Q, strengthening the case for the Reserve Bank to start raising interest rates next year
  • Brazil’s central bank will prolong its currency intervention program through at least the first half of next year after the real weakened yesterday on the Fed’s tapering announcement
  • Russia’s offer of a temporary 33% discount on natural gas prices for Ukraine may be extended for the long term, according to Russian President Vladimir Putin
  • North Korea’s execution of Kim Jong Un’s uncle and de facto deputy raises the risk the leader may take military actio against the South to demonstrate his authority after the purge
  • Credit Suisse Group AG defrauded investors of more than $1b by misrepresenting the risks of its RMBS, acting New Jersey Attorney General John J. Hoffman said in an interview
  • Sovereign yields mixed. EU peripheral spreads narrow. Nikkei gains 1.7% while Shanghai Composite falls ~1%. European stocks gain, U.S. equity index futures decline. WTI crude unchanged, gold and copper fall

FOMC Insights

Following on from the FOMC announcement last night we have compiled a full list of major bank research on the latest thinking and interpretation of the decision and thoughts on where we go from here.

Summary of highlights:

Goldman Sachs - Asset purchases are not on a pre-set course and the Committee's decisions about their pace will
remain contingent on the Committee's economic outlook for the labour market and inflation as well as its assessment of
the likely efficacy and costs of such purchases. (More)

UBS - CHF is likely to weaken as Fed tapering encourages investors to unwind safe-haven positions.

Citi - The yuan will gain about 1% against the dollar next year as Fed tapering is likely to restrain capital inflows and may
even cause some outflows.

SocGen - EUR/USD’s knee-jerk reaction to QE tapering may not follow through to the downside unless 2Y Treasury yields
head off to 0.5%.

Nomura - Strong relationship between risk markets and Italian, Spanish spreads should trigger tightening again after
Fed’s decision to taper QE purchases.

Fed watcher Hilsenrath - Notes four take away points in summary - 1: Bond buying trimmed, 2: inflation is the caveat,
3: rates to be low a long time, 4: consistent view on growth. (More)

PIMCO’s El-Erian - This is particularly good news for equity markets in the short-term, building on what already has
been a great performance year. It also contains the disruptions to bonds. (More)

Asian Headlines

Initially during session, the PBoC did not conduct open market operations for the 5th consecutive session today, and were
net flat for the week vs. a CNY 37bln net drain last week. At the same time, money market rates increased with the 3
Month SHIBOR Interest rate fix at 5.4239% vs. Prev. 5.3850%, while the 1-year interest rate swaps hit a record high.
This led the PBOC to extend interbank market trading hours to 5pm. The PBOC then said that they injected an unspecified
amount of CNY 200bln in SLOs cash into interbank market via short-term liquidity operation.

EU & UK Headlines

EU finance ministers agreed on a new system to centralize control of failing Euro-zone lenders, in the hope that it will stop
expensive banking crises from ruining the finances of entire countries.

BoE's McCafferty commented 'no sudden rate hike next year' and said the MPC will only consider lifting interest rates above their historically low level of 0.5% until joblessness drops to at least 7%.

UK Retail Sales Ex Auto (Nov) M/M 0.4% vs. Exp. 0.3% (Prev. -0.6%, Rev. -0.7%)
UK Retail Sales Ex Auto (Nov) Y/Y 2.3% vs. Exp. 2.4% (Prev. 2.3%)
UK Retail Sales Incl. Auto (Nov) M/M 0.3% vs. Exp. 0.3% (Prev. -0.7%, Rev. -0.9%)
UK Retail Sales Incl. Auto (Nov) Y/Y 2.0% vs. Exp. 2.2% (Prev. 1.8%)
UK November mortgage lending M/M GBP 17bln vs. Prev. GBP 17.6bln - gross mortgage lending rises 30% on the year to
November

Eurozone Current Account NSA (Oct) M/M 26.2bln vs Prev. 14.0bln (Rev. 15.2bln)
ECB Current Account SA (Oct) M/M 21.8bln vs Prev. 13.7bln (Rev. 14.9bln)

Fitch affirmed the UK at AA+; outlook stable.

Italian economy to contract 1.8% in 2013, according to Confindustria.

Swiss SECO sees 2014 GDP growth at 2.3% vs 2.3% in September's forecast.
Swiss Trade Balance (Nov) M/M 2.11bln vs Exp. 2.80bln (Prev. 2.43bln, Rev. 2.28bln)

US Headlines

Goldman Sachs says the Fed may not raise interest rates until unemployment falls as low as 5%.

Moody's said the wind-down of US Fed's QE program will likely lead to interest rates increasing globally and added that it sees a move towards normalization of monetary policy in the US, having a relatively finite and temporary impact.

Equities

Equities across the European session have been green across the board following on from positive sentiment in the Asian session as a result of the non-aggressive taper from the Fed which saw the Nikkei 225 print a six-year high. In terms of the outperformers this morning, the IBEX is leading the way being supported by Spanish banks. Whilst G4S are putting pressure on UK stocks after reports that the UK government have referred the Co. to the serious fraud office on 'concerns' G4S contracts.

FX

In FX markets, USD gains are relatively modest despite seeing upside following last nights taper decision.
However, overnight USD/JPY struck a five year high at 104.37. Despite the relatively rangebound trade throughout
the session so far, NZD was briefly supported by a better than expected GDP reading, however, this was short lived as
participants took this opportunity to buy the USD against NZD as the countries' monetary policies begin to converge.
Elsewhere, EUR has been trading relatively flat this morning with little in the way of economic commentary to guide
prices.

Commodities

Energy markets trade broadly flat heading towards the NYMEX pit open with little news-flow to determine price action following the volatility seen after the Fed began tapering their asset purchases at yesterday’s meeting.

Iraq November crude exports rise to 2.38mln bpd according to oil minister.

Iran has resumed pumping crude to Turkey's Ceyhan Port via an alternative pipeline due to a fault in the main link.

Libya's Messla oil field will reopen next week along with the Sarir refinery according to a report posted on the Co.'s website.

French Foreign Minister Fabius said has doubts over reaching a final deal with Iran over its nuclear program, citing doubts about the country's willingness to definitely abandon its nuclear ambitions.

 


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Thu, 12/19/2013 - 08:52 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Nothing but sincerity as far as the eye can see.

(Linus Van Pelt)

Thu, 12/19/2013 - 08:57 | Link to Comment Took Red Pill
Took Red Pill's picture

What's the deal with gold is at $1207 and silver at $19.35? Good time to buy or still headed lower?

Thu, 12/19/2013 - 09:00 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

All I know is when everyone at the 711 is talking about it......it will be time to sell it. 

 

Sell it for what.....I don't know.

Thu, 12/19/2013 - 08:59 | Link to Comment kralizec
kralizec's picture

I'll buy.  If it goes lower, I'll buy again.

Cheap insurance any way you look at it.

Thu, 12/19/2013 - 09:05 | Link to Comment XAU XAG
XAU XAG's picture

Heading lower

 

Just look at the chart

 

Look for the low in Jan 2014 in Gold and Feb for silver

 

JMHO

Thu, 12/19/2013 - 09:24 | Link to Comment ArrestBobRubin
ArrestBobRubin's picture

Will definitely add to stacks today- - I hope the cartel goes batshit on the metals.

Will also be adding AGQ and NUGT shares. I hope these 3x leveraged etf's continue to fall in price so I can load up for the eventual turn. I don't particularly care when it comes. 

Thu, 12/19/2013 - 09:36 | Link to Comment ThirdWorldDude
ThirdWorldDude's picture

Silver prices haven't changed at all in Europe. Premiums have gone up between 10 - 25% as all the large bullion retailers announced severe shortages for Ag a few days ago.

https://www.libertysilver.ee/en/

Thu, 12/19/2013 - 09:14 | Link to Comment Non Passaran
Non Passaran's picture

I bought a little today. Will keep buying. No thing has changed.

Thu, 12/19/2013 - 09:21 | Link to Comment new game
new game's picture

sell, sit, wait, think, wish, hope, restrategize, that a shit, piss and reinvest...

Thu, 12/19/2013 - 09:20 | Link to Comment mayhem_korner
mayhem_korner's picture

What's the deal with gold is at $1207 and silver at $19.35? Good time to buy or still headed lower?

 

Help me understand when would be a bad time to buy gold and silver.

Thu, 12/19/2013 - 09:24 | Link to Comment new game
new game's picture

fall of 12 at 1900

Thu, 12/19/2013 - 09:30 | Link to Comment Zero Point
Zero Point's picture

When they ask for your first born.

Thu, 12/19/2013 - 09:02 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

It was too orchestrated.  Either all of the Banks were told in advance to Buy because of the Taper, or it was the FED pulling the strings.

This is just too convient to be the real reaction.

Just as Santelli said yesterday about the FED Day Trading as with any dip in the Market they come in.  I think he is on to something.

Either way it shows the Market is being Manipulated.

Thu, 12/19/2013 - 09:01 | Link to Comment Jayda1850
Jayda1850's picture

From all the people I talk to in my business, business is terrible for a holiday. People just don't have the money. The FED will look like absolute fools if economy tanks and they have to ramp back up. I believe that is when all confidence is lost and shit goes downhill quick.

Thu, 12/19/2013 - 09:04 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

The FED will look like absolute fools if economy tanks

 

You must mean......more.

Thu, 12/19/2013 - 09:21 | Link to Comment Obchelli
Obchelli's picture

They look like fools now - but that doesn't change outcome cause fools are just too powerfull

Thu, 12/19/2013 - 09:09 | Link to Comment XAU XAG
XAU XAG's picture

Will just keep bumping ............has been for 5 years despite all the intervention.

Thu, 12/19/2013 - 09:15 | Link to Comment negative rates
negative rates's picture

It could just be me, I quit buying new stuff execpt  my car 11 years ago and have no intention of changing.

Thu, 12/19/2013 - 09:11 | Link to Comment thismarketisrigged
thismarketisrigged's picture

of course, today is monkey hammer gold and silver day, while keeping dow and s&p flat or up.

 

system needs to break already.

Thu, 12/19/2013 - 09:27 | Link to Comment ArrestBobRubin
ArrestBobRubin's picture

Well what about Bitcoin? After all the panic peddlers and haters let their freak flags fly here yesterday, BTC is already back to $700.

One writes off BTC at one's own risk...

Gold, Silver, Bitcoin: all have a place at my table

 

 

Thu, 12/19/2013 - 09:22 | Link to Comment BigSimes
BigSimes's picture

OK, I don't mind being humiliated and losing money on gold stocks. I am now a real zero hedge fan - at zero.

I was wrong on these points:

1. It is OK for governments to print money. I should never have doubted their academic astuteness. I should through all aspirations aside and work from them as a clerk, like Winston in 1984.

2. It is OK for big banks to have easy access to printed money. Those bankers work so hard and are so smart, they deserve to dupe us sheeples. I am not the wolf, nor the black sheep, just a sheep.

3. A rising stock market is great for everyone and the party must keep going on and on like when I was 18 and could drink and drink and drink... And as you get drunker, the ugly girls / stocks get better looking.

4. Gold and Silver are barbarous relics and should be sold to the Chinese ASAP so they can do something pretty with them, like make statues of Golden Lambs or Rings for Brides, or backing their currency. Won't it be funny when they realise gold is worthless, Buttcoin was fun, but Twatter and Facechook shares are the real deal!

Closing comments, paraphrasing Vanilla Ice:

"Quit the Zero and Get with the Hero" (the Fed, BoE, ECB etc).

Where's my sword so I can fall on it.

Thu, 12/19/2013 - 09:47 | Link to Comment XAU XAG
XAU XAG's picture

@BigSimes +1000

that's very funny

If that sord is made of solid silver..................can I have it when you finnished?

Thu, 12/19/2013 - 09:21 | Link to Comment NOTW777
NOTW777's picture

but why should we believe anything the fed says?  obama government agencies appear to lie about everything.  remember "we will not monetize the debt" taper this taper that = the fed can do whatever it wants - lawlessness. they could say they will taper 20 or 30 or 85 billion and then do the opposite. #auditthefed

Thu, 12/19/2013 - 09:23 | Link to Comment NOTW777
NOTW777's picture

but why should we believe anything the fed says?  obama government agencies appear to lie about everything.  remember "we will not monetize the debt" taper this taper that = the fed can do whatever it wants - lawlessness. they could say they will taper 20 or 30 or 85 billion and then do the opposite. #auditthefed

Thu, 12/19/2013 - 09:29 | Link to Comment new game
new game's picture

cash seems like best strategy when so much risk.

patience as echo bubble ready to unwind as 10 year goes to 3.

my focus as i think that is the crux/risk ben is taking.

but, he can buy the mofo and keep it and the 19 primary dealers in sync.

so, 10 year will rise to suck in as much money abroad and then be capped(at 3).

cycle to repeat down to 2.75 to suck in as much foriegn investment. buys time.

balance sheet risk rise, but at lower rate whilst praying something happen in econ

or just distort numbers to look as though all good and next taper...

Thu, 12/19/2013 - 10:02 | Link to Comment cro_maat
cro_maat's picture

"cash seems like best strategy when so much risk."

LOL - Cash (fiat $) is the risk. At the end of the game cash, financial instruments, debt will blow up. The feudal lords will have the assets and the sheeple will till their fields as they have done from time immemorial. I personally do not have the insider information needed to play this rigged trading game any more and I will not sell my soul to get it. I will continue to stack, buy farm land, get off the grid (and electronic tracking devices), buy quality tools, create quality products that real people will trade for and continue to build my network of like minded souls. I leave the Matrix to the Matrix. They can trade amongst themselves and spy on each other. Galt's Gulch exists in many places but you have to leave the Matrix to find it.

Thu, 12/19/2013 - 10:04 | Link to Comment max2205
max2205's picture

Spy getting hammered this pre mkt

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