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Futures Jump On Hope Emerging Market Rout Receding

Tyler Durden's picture





 

The depressed tone overnight following AAPL's disappointing earnings mysteriously evaporated just ahead of the European open, when around 2 am Eastern the all important USDJPY began an dramatic ramp, (with ES following just behind) which saw it rise from the Monday closing level of 102.600 all the way to 103.250, in what appears to have been a new frame-setting stop hunt ahead of a variety of news including the start of the January - Bernanke's last - FOMC meeting.

One of the potential triggers for the move may have been the RBI's unexpected hike in the repurchase rate  to 8.00% with an unchanged  7.75% consensus, which was its second consecutive INR-boosting "surprise." Among the amusing comments by RBI's Rajan, justifying the ongoing (loising) fight with inflation, was that India's consumer numbers are weak because of inflation. But... isn't that the Keynesian cargo cult's wet dream?

Moving to Turkey, where Turkey Central Bank governor Erdem Basci had an epic 2 hour long headline-generating fest ahead of the bank's midnight announcement which everyone is so keenly looking forward to as it will either delay the EM moment of reckoning, or it won't, and expectations are for everything from a 150 to 500 bps rate hike, up to and including capital controls. Among some of the things he noted was that tonight’s extraordinary meeting of the monetary policy committee targets taking necessary steps on price stability, and that the central bank won't refrain from permanent tightening if needed. He added that tightening using liquidity policy above what’s necessary can have a beneficial impact in times of high uncertainty and that Turkey’s central bank will discuss moving to a policy based on a single main rate at tonight’s extraordinary meeting: normalization via return to 1-week repo rate as the policy rate will be discussed, Basci said and stated that Turkey central bank sees less need for fx sales to support the lira ahead, and Basci says fx sales are more effective when supported by interest rates. Finally here is an example of Turkish forward guidance: "Turkey may see unexpected positive developments in the second half." Sounds about right for a central banker.

That said, good luck to Turkey whose economy is now set to grind to a halt as liquidity dries to a trickle, rates soar and its markets will probably not do much better. Especially since any measures the central bank engages in will be ultimately futile.

Anyway, keep an eye on the headlines at 5 pm Eastern when the TCB is expected to make its announcement.

Summarizing the market so far with Ran Squawk

Heading into the North American open, stocks in Europe are seen broadly higher, amid the alleviation of concerns surrounding EM nations after the RBI unexpectedly raised rates, while the PBOC injected CNY 150bln, which all comes ahead of the extraordinary monetary policy meeting by the Turkish central bank. As a result, JPY and CHF weakened, with USD/JPY advancing above the 55DMA line amid touted HF buying, while the out of favour EM currencies such as ZAR and TRY remained bid ahead of the policy announcement by the Turkish central bank scheduled for 2200GMT. Financials led the move higher, with Spanish banks outperforming after analysts at  Credit Suisse raised Banco Popular Espanol and CaixaBank to outperform from neutral. Looking elsewhere, consequent USD strength ensured that in spite of an in line UK GDP report, GBP/USD traded lower, as did EUR/USD which edged back below the 50DMA line. Going forward, attention will turn to earnings by Pfizer, AT&T, Ford and Yahoo. In terms of macroeconomic releases, focus will be on the latest Durables report, US Consumer Confidence and the weekly API data.

Overnight bulletin headlines from Bloomberg:

  • Treasuries decline as 2Y/5Y/7Y auction cycle begins today, with inaugural FRN sale tomorrow; yields also higher as FOMC expected to announce additional tapering tomorrow, offsetting demand created by ongoing retreat from emerging market currencies and stocks.
  • The U.K. economy expanded 0.7% in 4Q, ending the best year since 2007 amid growth in every industry except construction
  • China’s eleventh-hour rescue of wealthy investors in a high-yield trust threatens to drive more money into the nation’s $6t shadow-banking industry, undermining regulators’ efforts to deter excessive risk-taking
  • While Obama will say in tonight’s State of the Union address that he’s prepared to act without Congress to advance parts of his agenda, there is little he can do on the biggest issues for U.S. companies without agreement from legislators
  • Obama to use executive authority to impose minimum $10.10 wage for those working on new federal contracts for services, White House says in e-mail
  • Ukraine’s prime minister offered his resignation to help bring about an end to more than two months of street protests as parliament revoked anti-rally laws that sparked deadly riots last week
  • Reserve Bank of India unexpectedly boosts benchmark repo rate by 25bps to 7%; only 3 of 45 economists surveyed by Bloomberg predicted an increase
  • When Argentina decided last week to ease limits on dollar purchases, it became the latest emerging-market nation to acknowledge that capital controls usually fail in masking an economy’s flaws
  • A 39-year-old man died after falling from JPM’s London headquarters, the city’s Metropolitan Police said.
  • Sovereign yields mostly higher; EU peripheral yields decline, peripheral spreads narrow. Asian equity markets mostly lower; European markets, S&P 500 futures gain. WTI crude, copper higher; gold falls

US economic docket:

  • 8:30am: Durable Goods Orders, Dec., est. 1.8% (prior 3.5%, revised 3.4%); Durables Ex-transportation, Dec., est. 0.5% (prior 1.2%); Capital Goods Orders  Non-defense, Ex-aircraft, Dec., est. 0.3% (prior 4.5%, revised 4.1%); Capital Goods Shipments Non-defense, Ex-aircraft, Dec., est. 0.1% (prior 2.8%, revised 2.7%)
  • 9:00am: S&P/Case Shiller Home Price Index m/m, Nov., est. 0.8% (prior 1.05%) S&P/CS y/y, Nov., est. 13.8% (prior 13.61%); S&P/CS Home Price Index NSA, Nov., est. 165.72 (prior 165.91)
  • 10:00am: Consumer Confidence Index, Jan., est. 78 (prior 78.1)
  • 10:00am: Richmond Fed Manufacturing Index, Jan., est. 13 (prior 13)
  • 11:30am: U.S. to sell 4W bills
  • 1:00pm: U.S. to sell $32b 2Y notes
  • 11:00am: Fed to purchase $2.25b-$3b in 2021-2023 sector

Asian Headlines

PBOC injected CNY 150bln to the interbank market as it seeks to preserve necessary amount of liquidity and avoid potential credit crunch over the Chinese New Year holiday period.

INR strengthened overnight after the RBI raised the Repurchase Rate to 8.00% vs. Exp. 7.75% (Prev. 7.75%). The RBI has now surprised markets for the 2nd consecutive time and unexpectedly hiked rates.

EU & UK Headlines

UK GDP (Q4 A) Q/Q 0.7% vs. Exp. 0.7% (Prev. 0.8%)
- UK GDP (Q4 A) Y/Y 2.8% vs Exp. 2.8% (Prev. 1.9%), highest since Q1 2008
- UK preliminary 2013 GDP 1.9% vs 2012 0.3%, highest since 2007
Solid demand for the Finnish 10y syndication, together with the resurgence in risk appetite saw Bunds trend lower for much of the session. So much so that even larger than avg. month-end extensions failed to support prices.

Standard & Poor's said the Eurozone has made little progress in weaking links between sovereigns and vulnerable banks in their jurisdictions. Analysts also said that the Eurozone will continue with it's slow recovery in 2014, which high-frequency indicators appear to confirm this. (DJN)

Barclays preliminary pan-Euro agg month-end extensions: +0.14y (12m avg. +0.07y)
Barclays preliminary Sterling month-end extensions:+0.19y

US Headlines

In his State of the Union address, Obama will also call on Congress to pass a bill that would increase the federal minimum wage for all workers to USD 10.10 an hour from USD 7.25 and index that to inflation going forward. (RTRS)

Barclays preliminary US Tsys month-end extensions:+0.06y (12m avg. +0.07y)

Equities

Stocks traded higher in Europe this morning, with financials leading the move higher as market participants remained hopeful that EM central banks will be able to prevent further capital outflow, with credit and bond yield spreads also seen tighter this morning. Spanish listed banks outperformed its peers following positive broker recommendation by analysts at Credit Suisse. Better than expected earnings by Siemens also supported industrials in Europe, with the sector among the best performing in Europe.At the same time, tech sector underperformed since the get-go, as market participants in Europe reacted to less than impressive earnings by Apple after the closing bell on Wall Street yesterday (of note German listing is seen down 6.6%).

FX

USD/JPY traded higher, supported by touted HF buying, as market participants used the actions overnight by the RBI and the PBOC as an opportunity to enter carry trades ahead of the much anticipated extraordinary monetary policy meeting by the Turkish central bank later today. Of note, analysts at JPMorgan suggested that Turkey needs to raise O/N  rate 300BPS to achieve any meaningful effect. Nevertheless, EM currencies such as ZAR, TRY and INR remained bid overnight and during the London morning session.

Commodities

Goldman Sachs says spare refining capacity has led to greater product market flexibility, leaving oil markets benign this year even with inventories limited. (BBG)

Opponents to the Keystone pipeline are attempting to halt the progress of the pipeline by saying that trains cannot move all the oil out of Canada. (BBG)

According to analysts from Bernstein, Co.'s oil and gas output estimate has been revised up from 11.5mln boepd to 12.4mln boepd for 2014. (BBG)

Mexico reduced its gold reserves in December, whilst Ukraine, Turkey, Kazakhstan, Belarus and Azerbaijan increased gold reserves, according to IMF data. (BBG)

South African platinum producers have built a two-month stockpile to beat the current pay strikes occurring at the country's mines. (BBG)

 


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Tue, 01/28/2014 - 08:12 | Link to Comment ArkansasAngie
ArkansasAngie's picture

Just another day for the PPT

Animal spirits area ready to lead the parade.

Tue, 01/28/2014 - 08:43 | Link to Comment eclectic syncretist
eclectic syncretist's picture

Naturally they'll do everything reasonably possible to keep equities green for Bernankes last Fed meeting.  But once the meeting over, and the realization that there aren't any white knights coming to save us from the fiat disaster that was unleashed upon us 101 years ago, and that despite money printing to the moon people aren't going to buy iphones in ever increasing quantities forever, it's back to reality.

Tue, 01/28/2014 - 08:16 | Link to Comment Global Hunter
Global Hunter's picture

I commented yesterday that they were going let the equity markets lose 10 to 20% to make the people beg for more QE and an untaper, looks like I was wrong and last Friday was a BTFD moment.  Probably for the best I don't trade any more.

Tue, 01/28/2014 - 08:19 | Link to Comment negative rates
negative rates's picture

Why you just did, and I thank you for that.

Tue, 01/28/2014 - 09:16 | Link to Comment Headbanger
Headbanger's picture

No.  You need to drop this BTFD bullshit mentality to STFP or whatever you want to call it cause we is in a massive epic huge and really big drop now.

Tue, 01/28/2014 - 08:17 | Link to Comment buzzsaw99
buzzsaw99's picture

hopey wants to increase the minimum wage all the way to $10 per hour? seriously? I love this plan! I'm excited to be a part of it! LET'S DO IT! [/Dr. Peter Venkman]

Tue, 01/28/2014 - 08:21 | Link to Comment negative rates
negative rates's picture

It's just for the gvt's inner circle, the common man has to compete harder once the limit goes beyond $5/hr. 

Tue, 01/28/2014 - 08:26 | Link to Comment buzzsaw99
buzzsaw99's picture

In his State of the Union address, Obama will also call on Congress to pass a bill that would increase the federal minimum wage for all workers to USD 10.10 an hour from USD 7.25 and index that to inflation going forward. (RTRS)

 

It has no chance of passing but if it did it would make unemployment much, much, worse.

Tue, 01/28/2014 - 08:33 | Link to Comment suteibu
suteibu's picture

Passing, smassing.  He's got a pen.  Hadn't you heard?

Tue, 01/28/2014 - 08:36 | Link to Comment buzzsaw99
buzzsaw99's picture

he can raise the rate on federal contractors with that pen but he can't raise the federal minimum wage without congress. this points out better than anything how utterly clueless owebomba is.  puppet for the kleptocracy first, clueless imbecile second, dangerous psychopath always.

Tue, 01/28/2014 - 08:39 | Link to Comment suteibu
suteibu's picture

Already done.  WaPo...

President Obama will announce in the State of the Union address Tuesday that he will use his executive power to increase the minimum wage to $10.10 per hour for workers on new government contracts, fulfilling a top demand by liberal lawmakers and groups, according to a White House document.

 

Tue, 01/28/2014 - 09:09 | Link to Comment Richard Chesler
Richard Chesler's picture

A great spender of other people's money.

Tue, 01/28/2014 - 08:47 | Link to Comment TeamDepends
TeamDepends's picture

AND his battalions from the FSA. 

We cannot continue to rely only on our military in order to achieve the national security objectives that we've set. We've got to have a civilian national security force that's just as powerful, just as strong, just as well-funded.
Read more at http://www.brainyquote.com/quotes/quotes/b/barackobam409184.html#lhcv0zoydZke2Kpv.99 We cannot continue to rely only on our military in order to achieve the national security objectives that we've set. We've got to have a civilian national security force that's just as powerful, just as strong, just as well-funded.
Read more at http://www.brainyquote.com/quotes/quotes/b/barackobam409184.html#lhcv0zoydZke2Kpv.99 We cannot continue to rely only on our military in order to achieve the national security objectives that we've set. We've got to have a civilian national security force that's just as powerful, just as strong, just as well-funded.
Read more at http://www.brainyquote.com/quotes/quotes/b/barackobam409184.html#lhcv0zoydZke2Kpv.99
Tue, 01/28/2014 - 09:05 | Link to Comment TeamDepends
TeamDepends's picture

Oooops, fat finger.

Tue, 01/28/2014 - 08:41 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

It's curious how the libtards of the world do not understand the relationship between minimum wage and employment.  What do they think would happen to employment if the minimum wage was raised to $10,000/hour?  Or even $1,000/hour? 

Somehow, they believe that raising the minimum wage from $7 to $9 or $10 is good, but that raising it to $100 or $1,000 is different.  That's like saying that driving 5 mph over the speed limit increases safety but driving 30 mph over it doesn't.

Tue, 01/28/2014 - 08:49 | Link to Comment Global Hunter
Global Hunter's picture

your post reminds me of people defending QE, Stimulus, bailouts etc. and I say "so if bailing out banks helps us by stimulating the economy, why don't they pay my mortgage off and all my neighbours and give the young people capital for houses because if we had no rent or mortgages we'd spend and stimulate the economy no?"

Tue, 01/28/2014 - 09:49 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

<deleted

Tue, 01/28/2014 - 09:51 | Link to Comment ...out of space
...out of space's picture

this is a what a 40% increase in minimum wage.

are the masters really good with a people, or is it something else?

Tue, 01/28/2014 - 08:26 | Link to Comment RealityCheque
RealityCheque's picture

"A 39-year-old man died after falling from JPM’s London headquarters, the city’s Metropolitan Police said"

1) thats one less JPM scumbag, hooray!

2) History often suggests that these folks don't generally "fall" from tall buildings as much as they are "thrown", "launched" or "suicided". I wonder what he did to upset the big boys?

Tue, 01/28/2014 - 08:33 | Link to Comment suteibu
suteibu's picture

Maybe he was one of those retirees who, after making all the money he needs, was going to write a tell-all book.  That's seems to be the way it works.

Tue, 01/28/2014 - 08:45 | Link to Comment RealityCheque
RealityCheque's picture

"police forgot to state that during post-mortem examination, a manuscript of his biography was found shoved up his ass. Further analysis revealed the fingerprints of Jamie Dimon on the pages."

Sounds about right.... 

Tue, 01/28/2014 - 08:34 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Full speed ahead, Mr. Murdoch!  Full ahead!

Tue, 01/28/2014 - 08:40 | Link to Comment Kaiser Sousa
Kaiser Sousa's picture

while the MoneyChangers in the west play their stupid paper price game…..the new reserve currency prepares to take the stage…i suggest u view the movie “Looper” to get a preview via the cinema of the world as it is going to be…america is headed to serfdom...

"Gold’s biggest slump in three decades has been a boon for MKS (Switzerland) SA’s PAMP refinery near the Italian border in Castel San Pietro, whose bullion sales to China surged to a record as demand rose for coins, bars and jewelry.

As prices plunged 28 percent in 2013, investors dumped a record 869.1 metric tons from gold-backed funds traded mostly in the U.S. and Europe. Much of that metal is ending up in Asia, where companies such as The Brink’s (BCO) Co., UBS AG and Deutsche Bank AG are opening new vaults. China’s expanding wealth has made the country the world’s largest buyer, surpassing India, as imports reached an all-time high.

PAMP Managing Director Mehdi Barkhordar, who credited China’s “insatiable” appetite for a sales boost of as much as 20 percent last year, remains optimistic even as growth in the world’s second-largest economy slows. “The demand in China is off its peak, but still respectable,” he said last week. To keep up with orders, MKS added shifts at the PAMP refinery, located about 4 miles (6.4 kilometers) from the Italian border, Barkhordar said in November as he showed off a 1-gram gold piece the size of a fingernail.

Furnaces that can process more than 450 tons a year were at full capacity from April to June, melting mined metal, scrap jewelry and ingots at 1,000 degrees Celsius (1,832 degrees Fahrenheit) into the higher purities and smaller sizes favored by Asian buyers.

Brink’s, the largest provider of precious-metals logistics and storage, is adding room on top of a vault the company opened in 2012 at the Singapore Freeport building next to Changi International Airport, with a sleek, modernist lobby and a twisting, polished-steel sculpture by Ron Arad that stands 5 meters high. Inside, the gold bars are protected by prison-like barriers, two body scanners and 8-ton, fireproof gates.

Stuffed Vaults

“We need additional capacity, so we have to take further space,” said Baskaran Narayanan, the 45-year-old Singapore general manager for Richmond, Virginia-based Brink’s. “There’s a surge in demand for precious metals in Asia, and one can see the focus and movement from the west to the east.”

http://www.bloomberg.com/news/2014-01-28/gold-flows-east-as-bars-recast-...

 

Tue, 01/28/2014 - 08:44 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

The paper trade is the only thing suppressing the price of gold.  That's why the banks need to perpetuate the ETF until the time comes to head for the exits.  By then physical will be scarcer than hen's teeth.

Tue, 01/28/2014 - 09:00 | Link to Comment kenezen
kenezen's picture

Very good article!  The National China Press, generally very conservative, was very loud not long ago when it insisted that the US currency must not have so much international impact and use. One must deduce that with the massive acquisition of gold, China plans to be the primary Reserve Currency. The BRIC nations are already readjusting.  

Tue, 01/28/2014 - 08:56 | Link to Comment MFLTucson
MFLTucson's picture

Monopoly game opens again today to grab a few more suckers.

Tue, 01/28/2014 - 09:15 | Link to Comment Took Red Pill
Took Red Pill's picture

Future jump and so do the bankers

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