Equity Rebound Continues Into Day Two: New All Time Highs Straight Ahead

Tyler Durden's picture

Day two of the bounce from the biggest market drop in months is here, driven once again by weak carry currencies, with the USDJPY creeping up as high as 104.50 overnight before retracing some of the gains, and of course, the virtually non-existent volume. Whatever the reason don't look now but market all time highs are just around the corner, and the Nasdaq is back to 14 year highs. Stocks traded higher since the get-go in Europe, with financials leading the move higher following reports that European banks will not be required in upcoming stress tests to adjust their sovereign debt holdings to maturity to reflect current values. As a result, peripheral bond yield spreads tightened, also benefiting from good demand for 5y EFSF syndication, where price guidance tightened to MS+7bps from initial MS+9bps. Also of note, Burberry shares in London gained over 6% and advanced to its highest level since July, after the company posted better than expected sales data. Nevertheless, the FTSE-100 index underperformed its peers, with several large cap stocks trading ex-dividend today.

Gold falls for a second day. Spanish bonds advance, while Bunds snap a three-day gain ahead of a EU5b debt sale. Portugese bonds rise, as the govt. sells 12-month bills at the lowest yield since 2009. The dollar rises off a two-week low against the euro.

Looking elsewhere, despite the risk on sentiment, USD index remained supported by hawkish commentary by Fed members, as well as the surge higher by USD/JPY overnight which benefited from a positive close by the Nikkei 225 index which posted its biggest one-day gain in four months. Going forward, market participants will get to digest the release of the latest Empire Manufacturing report, PPI and DoE data, as well as earnings by Bank of America.

  • S&P 500 futures up 0.2% to 1836.7
  • Stoxx 600 up 0.6% to 333.2
  • US 10Yr yield down 0bps to 2.87%
  • German 10Yr yield up 1bps to 1.82%
  • MSCI Asia Pacific up 0.6% to 139.5
  • Gold spot down 0.5% to $1239.3/oz

US Event Calendar

  • 7:00am: MBA Mortgage Applications, Jan. 10 (prior 2.6%)
  • 8:30am: Empire Manufacturing, Jan., est. 3.5 (prior 0.98)
  • 8:30am: PPI m/m, Dec., est. 0.4%  (prior -0.1%); PPI Ex Food and Energy m/m, Dec., est. 0.1% (prior 0.1%); PPI y/y, Dec., est. 1.1% (prior 0.7%); PPI Ex Food and Energy y/y, Dec., est. 1.3% (prior 1.3%) Central Banks
  • 9:15am: BoE’s Carney speaks in London
  • 12:50pm: Fed’s Evans speaks in Coralville, Iowa
  • 2:00pm: Fed releases Beige Book
  • 5:45pm: Fed’s Lockhart speaks in Atlanta

Overnight news bulletin from Bloomberg and RanSquawk

  • Stocks traded higher since the get-go in Europe, with financials
    leading the move higher following reports that European banks will not
    be required in upcoming stress tests to adjust their sovereign debt
    holdings to maturity to reflect current values.
  • World Bank lowered China 2014 and 2015 growth forecasts, with China 2014 growth forecast cut to 7.7% from 8.0% forecast in June.
  • Treasuries steady, 10Y 2.871% after stronger than forecast U.S. Retail Sales yesterday pushed yield up from lowest since early December.
  • Germany’s GDP probably slowed in 4Q, increasing about a quarter of a percent compared with 0.3% in 3Q, according to the Federal Statistics Office
  • EU lawmakers clinched a deal to toughen the bloc’s financial-market rulebook, backing sweeping measures that will put the brakes on high-frequency trading and curb speculation in commodity derivatives
  • China’s broadest measure of new credit fell in December while money-supply growth and new yuan loans trailed estimates amid a cash crunch and government efforts to curb speculative lending
  • Senators retreated to their partisan corners after the chamber failed to advance a Democratic plan to restore emergency jobless benefits that expired Dec. 28.
  • The Obama administration said it would ramp up Obamacare outreach in 25 cities to lure younger people to the program after a report showed about 70 percent of the initial customers are 35 years of age or older
  • Requiring the NSA to get a warrant each time it wants customer records from phone companies won’t hinder terrorism probes, members of a White House advisory panel said days before Obama plans to announce changes to spy programs
  • Sovereign yields higher; EU peripheral spreads narrow. Asian and European equity markets gain; U.S. equity-index futures higher. WTI crude and copper higher, gold falls


The World Bank raised its world growth forecast for 2014 and 2015, raised Eurozone 2014 GDP to 1.1% from 0.9%, increased Japan 2014 GDP growth figure to 1.4% from 1.2%, but lowered China 2014 and 2015 growth forecasts with China 2014 growth forecast cut to 7.7% from 8.0% forecast in June. (BBG/TTN)

Asian Headlines

Credit Suisse believes the BOJ needs to stimulate sooner rather than later with easing on the cards in Feb or Mar meetings. (CS)

Chinese New Yuan Loans (Dec) M/M 482.5bln vs. Exp. 570.0bln (Prev. 624.6bln) (BBG)

Foreign Reserves (USD)(Dec) M/M 3280.0bln (Prev. 3660.0bln, Rev. 3662.7bln)

EU & UK Headlines

ECB said in a letter to EU lawmakers it is not foreseen that held-to-maturity sovereign debt portfolios will be marked-to-market in European bank stress tests. (BBG/RTRS)

Peripheral bond yield spreads are seen tighter this morning in Europe, with EFSF attracting solid demand for its 5y syndication, where books are said to be around EUR 12bln.

Germany sells EUR 4.104bln in 1.00% 2019 Bobl (new), b/c 1.7 (Prev. 1.6) and avg. yield 0.9% (Prev. 0.68%), retention 17.9% (Prev. 17.8%). (BBG/RTRS)

Eurozone Trade Balance SA (Nov) M/M 16.0bln vs. Exp. 14.8bln (Prev. 14.5bln, Rev. to 14.3bln)

Eurozone Trade Balance NSA (Nov) M/M 17.1bln vs. Exp. 16.5bln (Prev. 17.2bln, Rev. to 16.8bln)

US Headlines

US House of Representatives passed the bill funding US government through January 18th. US Senate Majority Leader Reid said the omnibus bill vote will probably be on Friday. (BBG)


Financials outperformed in Europe, as credit spreads tightened following reports that European banks will not be required in upcoming stress tests to adjust their sovereign debt portfolios they hold to maturity to reflect current market values. As a result, the likes of Commerzbank, Deutsche Bank and other major EU based financials traded with gains of over 2%. At the same time, Spanish giant Santander traded ex-dividend and as a result underperformed broader sector. Also of note, the FTSE-100 index underperformed its peers, with several large cap stocks trading ex-dividend today.


In spite of the broad based risk on sentiment, USD index remained supported by yet another grind higher by USD/JPY overnight after the Nikkei 225 index posted its biggest one-day gain in four months, as well as hawkish Fed commentary from the night before. At the same time, firmer USD, together with World Bank lowering its China 2014 and 2015 growth forecasts resulted in broad based pressure on AUD, with the pair falling below its 21DMA in the process.


China 2014 oil demand to rise about 4% to 518mln Mt and net crude imports to increase 7.1% to 298mln Mt in 2014, according to CNPC data. Also of note, Brent crude may drop to USD 100/bbl to USD 108/bbl this year and WTI oil may rise to average USD 97/bbl to USD 105/bbl, according to CNPC forecasts. (BBG)

No Libyan crude is been pumped to ports outside state control as all fields are under regular army control. (Libya News Agency)

US API Crude Oil Inventories (Jan 10) W/W -4140k vs. Prev. -7310k
- Cushing Crude Inventory (Jan 10) W/W 152k vs. Prev.1190k
- Gasoline Inventories (Jan 10) W/W 5400k vs. Prev. 5580k
- Distillate Inventory (Jan 10) W/W -1700k vs. Prev. 5170k

Indian gold demand this month has halved from a year ago despite the fall in prices and expectations of better purchases in the wedding season as consumers are being cautious and younger people prefer to spend on fancy gadgets rather than the precious metal. (indiatimes)

US Mint cut silver-coin supply to 500,000-600,000 for next week, but said that allocation is to increase in following week. The US Mint also state that silver-coin sales today were 191,000 and that 203,500 silver-coins remain this week. (BBG)

* * *

Deutsche's Jim Reid concludes the overnight event recap

Yesterday was indeed a stronger day (S&P 500 +1.08%) seemingly on better than expected retail sales data (0.2% vs 0.1%) although the negative revisions (-0.1ppt in October and -0.3ppt in November) could allow this report to be interpreted as slightly weaker net net. The fact that the most recent month was stronger seemed to be the dominant factor for investors though supported by the fact that 10yr USTs rose 4.5bps. Elsewhere the November US business inventory data showed a +0.4% gain (0.3% consensus) after an upwardly revised reading of +0.8% in October. But DB economists point out that business sales surged by +0.8% in November, so the net effect was to keep the business inventories to sales ratio at 1.29 for the seventh consecutive month.

A couple of Fed hawks in Plosser and Fisher were on the newswires, the former supporting the Fed’s gradual windup of QE in 2014 and Fisher arguing for a more aggressive end. In one of the more colourful speeches I've ever read from a Fed representative, Fisher made an analogy that the market had “beer goggles” from QE and was prone to a correction. Fisher who is a voter this year, said he planned to argue for a faster exit to QE and will vote accordingly. It was interesting to see that equity markets brushed off the comments from Plosser and Fisher (both voters this year), while Monday’s comments from Lockhart (also supporting a gradual 2014 taper) had a larger impact.

Taking a quick look at overnight markets, Asian equities have bounced back from yesterday’s weakness to post some solid gains on the day. The Nikkei (+2.1%) has managed to pare back most of yesterday’s 500 pt fall helped by the dollar/yen which is now firmly back above 104. Indeed, dollar strength is evident across the board (dollar index +0.25%) at the expense of EURUSD (-0.34%) and AUDUSD (-0.6%). In China, the latest money supply data was slower than expected and showed that aggregate financing was 1.23 trillion yuan ($204 billion) in December compared with 1.63 trillion yuan a year earlier. Bloomberg notes that the second half of 2013 saw a record decline in new credit. The Shanghai Composite (-0.6%) is lagging other bourses today and copper futures are down 0.8%. On a related note, we should highlight that the Baltic Dry freight index has started the year with nine straight declines, totalling a 36% decline in the YTD.

Yesterday also saw the release of inflation data in the UK, France and Italy. In France (0.8% s 0.8% previous) and Italy (0.7% vs 0.7% previous), inflation remained at or very close to post-financial crisis lows. The UK print was interesting. After spending 48 consecutive months above the Bank of England’s 2.0% target, UK inflation finally returned back to 2.0%, which was slightly below consensus estimates of 2.1%. DB’s UK economist George Buckley points out that UK inflation is still above all other G7 economies but he highlights at least seven important factors that could well send inflation lower over the coming year. Amongst these reasons is that fact that unit wage costs were running at a rate of just 1.2% yoy in Q3 last year and may well have posted an outright decline in Q4 relative to a year earlier. Also, the BRC just last week reported shop price deflation of 0.8% yoy – the weakest print since the series began. In addition, the continuation of slow rates of upstream price inflation (also published yesterday) should retain the downward pressure on headline inflation. In terms of FX, the sterling’s appreciation is likely to be an important source of disinflation going  forward.

The US bank earnings season got off to a solid start backed by the earnings beats from JP Morgan and Wells Fargo. In a quarter marred by a number of one-offs, JPM recorded some impressive growth in its investment banking (fees +11% q/q) and FICC trading (+7% q/q). The bounce back in FICC trading revenues provided some relief to bank investors particular after the investment banking community recorded a lacklustre Q3 in fixed income trading. On a less positive note, despite expectations of a strong Q4 for equities across the industry, JPM posted a 30% drop q/q in the equity trading division. DB’s equity analysts note that mortgage production, as expected, declined sharply—production revenue declined 15% on a 42% drop in originations and a 23% decline in applications as rising mortgage rates bite into that business. There were no major surprises in the Wells Fargo result though we noted the mortgage bellwether reported its mortgage originations amounted to $50bn, compared with the $125bn reported a year earlier and $80bn in the prior quarter. Continuing the theme of poor earnings performance from the consumer-discretionary sector, Gamestop fell almost 20% (its biggest one day loss in 11 years) after the company cut its Q4 profit due to weaker-thananticipated console game sales.

In other news, many have noted that following the softening of leverage ratio and Liikanen proposals, the trajectory of regulatory pressure for European banks has been easing of late. Indeed this may have partially explained some of the 5ppt outperformance of European banking stocks compared with the Stoxx600 over the last month. The easing regulatory environment was confirmed again yesterday after newswires published a letter from Mario Draghi to the Chair of the European Parliament’s Economic and Monetary Affairs Committee saying that it is “not foreseen” that hold-to-maturity sovereign exposures will be marked-to-market in upcoming ECB stress tests (Financial Times). The news will probably provide a bigger boost to banks in peripheral Europe. Balancing against this, it was also reported yesterday that some Basel Committee officials are pushing for a higher leverage ratio despite recently giving banks some relief on the way the figure is calculated. As it stands, Basel’s 3% leverage ratio is merely a minimum floor – it is thought many local regulators will raise requirements beyond this. The Fed is also thought to be contemplating a 5% ratio at the operating company level and 6% leverage hurdle at the holding company (Reuters).

Turning to the day ahead, the data docket consists of Spanish CPI and the NY Empire Fed manufacturing and US PPI. Bank of America reports Q4 earnings today before the opening bell.

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fonzannoon's picture


that is all.

SAT 800's picture

I gave up and took my $1200 loss on my short SP500 position. I really need to leave this alone.

satoshi101's picture

I feel like I have been bit-fucked by ZH,

I bought BTC at $1200,

I shorted the DOW, and SP as told

I bought gold at $1900,

I have done everything I was told,

I shorted the USD when it was 90:1 with the JPY, ...

Where am I today? Where is ZH when I need support?

XAU XAG's picture



Buy a pair of crutches................ZH is doing a special deal of the month!


Sell you BTC and it's next peak (look at the charts)

Hold your shorts on the SP

Swawp your gold for silver if GSR hits 70

As for your shorts on currency.................check the charts and get the feck out of currency bets unless you know what you are doing




Some Sark and not some sark

firstdivision's picture

I stopped reading after "I bought BTC at $1200"

Perhaps you should ask ZH for a refund of your subscription fee...

XAU XAG's picture



I think you will find ................he was being sarcy like your subscription fee!



Hindenburg...Oh Man's picture

BTFD was so yesterday. Now it is BTFATH.



Donewidit's picture

At what point does this lead to higher inflation or loss of confidence?

fonzannoon's picture

according to Faber every week.

greatbeard's picture

>> according to Faber every week.

And, afaict, he's been correct.  When I talk to them man on the street, there is inflation.  When I talk to the man on the street, there is no confidence.

stocktivity's picture

according to Faber every week for the past 5 years...since SP was at 666 in March of 2009. We drop 20% now and the goof will say he called it. It's all Bullshit!!!

HpDeskjet's picture

There is a lot of inflation, in stocks and other financial assets. Since people are allowed to "invest" in commodities via futures, also food/energy/etc. are going up, but without QE, there would be massive deflation.

Confidence in what? Everybody who owns financial assets seems confident...

disabledvet's picture

yes...and see below. in the meantime Bill Gates declares all Americans morons while deciding to rid the world of malaria thus creating a mass starvation event...while all those "dumb Americans" launch rockets to a Space Staion that is only 250 miles away. For 250,000 bucks.

XAU XAG's picture

They reported low inflation in UK


Guess what has gone down in thier crap inflation basket, in price!


Fecking TOYS!


Everything you need is going up and everything you don't need is going down.


This is going to go on and on ala Japan


It's a debt induced mess..............and thier answer more debt!


This is the biggest ponzi of them all and if is ever allowed to collapse there is going to be alot of hurt..........we have'nt seen nothing yet


Stocks to the moon ..........pension funds have no other choice........untill they have no choice at all


My wrant for the day!

firstdivision's picture

Higher inflation is and has been here since QE's started.  Input costs have risen, along with food inflation.  Food inflation has been buried in by the producers of processed crap giving you less for the same amount.  For everything else, the inflation is buried in their crushed margins, while they try to slowly leak it out into the price. Once they hit their breaking point, it'll be passed on to consumers at an accelerating rate.

Max Damage's picture

Ok so the bonds that are the next big problem don't have to be valued properly. That will end well then!!

eddiebe's picture

All the above means is that paper and paper pushers are in firm control and all of us stackers remain stewing.

eddiebe's picture

Sucks to be right.

q99x2's picture

The markets are computer driven. Scary computer.

Sudden Debt's picture

Thank god I didn't buy any puts...

fijisailor's picture

Tapering is another lie.  The FED is secretly increasing QE.  The first casualty of war is the truth.

fijisailor's picture

You like pink koolaid and unicorns.

fijisailor's picture

You're so accomodating.  I order you to buy facebook,twitter and tesla.

XAU XAG's picture

@negative rate


Got any nued pictures of your wife?


You answer, No


Do you want to buy some?


Only kidding.................my waco sense of humor!

XAU XAG's picture

@negative rates


Sorry to hear you are still paying the bills


Sudden Debt's picture

That's between me and your wife...

XAU XAG's picture



That's fine...................she gives me 50%


But I think she is holding out on me .................I get 1Euro for every pic!

new game's picture

keep on watchin the ten year. 19 primary dealers plus direct balance statment buys.

gov budget continues at -1 trillion if you include 100b for afgan. create debt money>buy those treas>park em in reserve for .0025>keep it going...

year 2020 >abenomics, same demographics inplay>20+t of debt. 

safe to say that is what happens-what is to disrupte it short term?

if japan finallllllllllllllllllllllly cracks the whole thing cascades in world chaos...

XAU XAG's picture

@new game

Not sure if it will be Japan first but who the feck knows.


I am thinking it will come from left field and knowbody see's it comming.


There is a snow flake out there somewhere and when it falls we will be all suffurcating in the snow!

new game's picture

reminds me of this:

why did the snowman have a grin?

heard the snowblower start up down the street!

XAU XAG's picture

@new game


Come on........................the snowblower!

new game's picture

so therefor if all those flakes melt from global warming we are fk'd for sure...

XAU XAG's picture

@negative rates


Does it not depend on the way you are facing the field?


ie if apponent is facing you it's thier right your left!



new game's picture

meanwhile gold hammer/dolla strength

at least that is normal


kurzdump's picture

Futures up, yields down. The new normal.

SheHunter's picture

Definition of short squeeze  =  TSLA

Rehab Willie's picture

Hey look, the Hindenburg is on fire.

Kaiser Sousa's picture

"everything coming up roses..."

we're all getting rich in the "Fraud" Markets...

everybody get up right now and run to your Blackstone owned and rented $3,000 a month 1 bedroom apartment window and toss all you Silver and Gold out the window!!!!

and then scream, "Thank you oh wonderous Banker Lords....."

that is all.......

q99x2's picture

"Empire Manufacturing report, PPI and DoE data, as well as earnings by Bank of America."

Bull crap. I want to know what numbers the FED is typing into its software.

Dr. Engali's picture

The fed is making it easy to fund my precious metals purchases. BTFD , take profits, and then buy PMs on the smack down. So easy an E-Trade baby can do it.

Kaiser Sousa's picture

right there with you bro...

fact, no matter what now im so fucking pissed over all this fraudulent bullshit I WILL NEVER SELL OR STOP CONVERTING DEBT COUPON DOLLARS INTO REAL MONEY....

so there fucking MoneyChangers....KISS MY FUCKING ASS.....

Blano's picture

Wish it was that easy.  I always hit the wrong dip.

eddiebe's picture

How fucking pathetic to have to hope and wish for the shit to hit the fan. Trapped lile a fucking squirrel in a cage and running on the treadmill all the while falling further behind.  I feel your pain, satoshi.

muleskinner's picture

Kerogen, a building block for oil, constantly creates new oil down there in the Bakken Formation.

As it is pumped out of the ground, the sipping out of the oil increases the ability of the kerogens to create more new oil.

The numbers are very encouraging for oil from the Bakken.

The success rate is at 99 percent.  If you drill for oil anywhere in the Bakken, you are going to strike oil 99 times out of 100.  The hydrocarbon system is studied and the compilation of the data is nearly complete.  An immature system has plenty of natural gas, a mature system, all oil.  The Lodgepole above the upper Bakken Shale has Bakken oil deposited from the great pressure from oil forming, cracking the upper layer and the newly formed oil from the kerogen and hydrogen present in the formation leaks/leaked through fissures in the upper Bakken shale layer and pools in the Lodgepole.  The same for the lower Bakken shale and the Three Forks-Sanish formation.

The daily reports are consistently in the 10 to 12 thousand barrel range, adding more to the daily total production.

Hundreds of oil companies are there today.  It's a for profit business.  No oil, no oil companies.  That'll be the day.

The oil industry is full of innovation, it has to be or you won't drive your car anywhere because there would be no oil.

If you want it, you have to find it, then go through the work and process of obtaining it.  

It is then handed to you on a pillow, if you want to know the reality of it all.  Thank your lucky stars somebody wants to chase sand anywhere on earth.

At an 87 million barrel daily consumption rate, it is the number one commodity on the planet.

Must be plenty of it across the globe at that rate of consumption.  There had better be, everybody is jonesin' for the stuff.  Starts wars, all sorts of crazy happenings when oil is involved and people vy for its incredible payoff.

Easy to sell, not so easy to obtain it and move it to where it needs to be.  What you call inelastic demand.  An oil company's dream come true.

Long oil

The Lakeview Gusher:





disabledvet's picture

they say shale oil is "like a sponge" so the oil comes up in a gee consistent and manageable flow. the problem is how to transport it all. Rail has been working...but now they've had terrible accidents. Huge oil spills with pipilines that never should have been built. Next up: HUGE ships and barges. this is like Ohio in the 1800's. "refineries everywhere."

Being Free's picture

Indian gold demand this month has halved from a year ago despite the fall in prices and expectations of better purchases in the wedding season as consumers are being cautious and younger people prefer to spend on fancy gadgets rather than the precious metal. (indiatimes)

What a bunch of BS propoganda.  Of course the Indan .gov restrictions on gold imports and heafty tax increases in 2013 have othing to do with the yoy reductions.  They must be scared shitless to be putting out such trasparent misinformation.

fijisailor's picture

If the official channels in India say it's halved and smuggling is going way up then probably total demand is abova a year ago.  Scared shitless is right.  Truth has gone out the window and only US style propaganda is the plan.

disabledvet's picture

if "smuggling" is on the rise that's because all their gold is imported. same with China. spreads have widened...premiums soared. the numbers coming from the mints are staggering. talk about real money. "more than enough to fund a war effort."