Overnight Carry-Driven Futures Ramp Pushes Stocks Just Shy Of New Record

Tyler Durden's picture

Just when it seemed that the ever deteriorating situation in the Crimean, the unexpected plunge in Chinese exports which has sent the Yuan reeling again, the Copper slam which is down some 10% in two days, and the outright collapse in Japan's capital flows, not to mention the worst GDP print under Abe, may not be quite "priced in" by a market that is now expecting well beyond perfection in perpetuity, further shown by Goldman over the weekend which reprorted that revenue multiples have never been greater, and futures may finally dip, here came - right on schedule - the USDJPY levitation liftathon, which boosted futures from down 10 to barely unchanged, and which should be green by the second USDJPY ramp some time just after 8 am.

While the risk averse sentiment which was evident overnight in Asia as a result on weaker than expected trade data carried over into the European session and resulted in stocks opening lower, the cautious sentiment gradually reversed as market participants sought to capitalise on the sell-off. The sharp slide in Chinese exports and data overall was in part attributed to China clamping down on fake invoicing, as well as copper financing, also coincided with iron ore entering bear market territory, which in turn meant that basic material related stocks underperformed this morning. However the flight to quality was short lived and stocks have gradually moved off lows, with USD/JPY also recovering overnight losses, since it is widely expected that China will hit its growth targets which the state announced only last week. At the same time, Bunds were able to close the opening gap higher and USTs moved back to flat. There was little in terms of tier 1 macroeconomic releases this morning and going forward, market participants will get to digest comments by Draghi and Coeure, while the BoE will conduct its first APF op this week (part of Gilt reinvestment programme)

Bulletin overnight summary from Bloomberg and RanSquawk:

  • Commodities under pressure following the release of Chinese Trade Balance data, which itself was attributed to China clamping down on fake invoicing, as well as copper financing.
  • However the consequent cautious sentiment was short lived in Europe this morning and stocks managed to recover off lowest levels of the session, with Bunds also closing the opening gap higher.
  • Eurogroup Chairman Dijsselbloem said that Greece will not get the next bailout loan tranche unless an agreement with the Troika is reached.
  • Treasuries little changed, 10Y yields 2.794% after closing at highest since Jan. 22 Friday following stronger than forecast payrolls; focus on retail sales tomorrow, $64b 3Y/10Y/30Y auctions.
  • China’s exports plunged 18.1% in February vs expectations for gain of 7.5% while producer prices fell 2%, the most since July
  • China’s broadest measure of new credit trailed analysts’ estimates in February, indicating a slowdown in shadow banking following the near-default of a trust investment product
  • The yuan fell after the PBOC bank cut the currency’s fixing by 0.18%, most since July 2012
  • Russian forces advanced in Ukraine’s Crimean peninsula, ignoring Western calls to halt a military takeover before the region’s separatist referendum
  • Investigators from nine countries are struggling to solve the mystery of a missing Malaysian jet, as Vietnamese forces today failed to find the airplane debris they had spotted yesterday off the country’s southern coast
  • The amount of debt globally has soared more than 40% to $100t since the first signs of the financial crisis as governments borrowed to pull their economies out of recession and companies took advantage of record low interest rates
  • Philly Fed President Charles Plosser said recent encouraging economic data isn’t enough to change the pace of the central bank’s asset purchases
  • Sovereign yields mostly lower. EU peripheral spreads widen. Asian equities fall, with Nikkei-1%, Shanghai -2.9%. European equity markets gain, U.S. stock-index futures decline. WTI crude, gold and copper lower

US Event Calendar:

  • No Major events
  • POMO - 11:00am: Fed to purchase $2.25b-$2.75b notes in 2021-2024 sector

Asian Headlines

Chinese CPI (Feb) Y/Y 2.0% vs. Exp. 2.1% (Prev. 2.5%), PPI (Feb) Y/Y -2.0% vs. Exp. -1.9% (Prev. -1.6%)
Chinese Trade Balance (Feb) (USD) Y/Y -22.99bln vs. Exp. 14.50bln (Prev. 31.86bln, Rev. 31.87bln)
Exports (Feb) Y/Y -18.1% vs. Exp. 7.5% (Prev. 10.6%)
Imports (Feb) Y/Y 10.1% vs. Exp. 7.6% (Prev. 10.0%)
Japanese GDP SA (Q4 F) Q/Q 0.2% vs. Exp. 0.2% (Prev. 0.3%)
GDP Annualized SA (Q4 F) Q/Q 0.7% vs. Exp. 0.9% (Prev. 1.0%)

EU & UK Headlines

ECB's Noyer says rate cuts not 'too controversial' for the ECB, adding that economic data has been inline with baseline scenario and economic conditions are inline with monetary policy at this stage. ECB's Noyer also said that he fully agrees with BUBA Chief that suspension of sterilisation is one of the tools ECB could use if needed. (RTRS/BBG)

ECB set to give Eurozone banks details of asset quality test approach on dealing with bad loans, according to sources. (RTRS)

Eurogroup Chairman Dijsselbloem said that Greece will not get the next bailout loan tranche unless an agreement with the Troika is reached. (Ta Nea)

- Over the weekend the Greek government and Troika officials reached an agreement on the capital needs of the country's banks. (Athens News Agency)

- The Eurogroup are meeting in Brussels today to discuss the Greek economic adjustment program; Troika are set to return to Greece on Wednesday March 12th.

US Headlines

Republicans are challenging Barack Obama to use America’s burgeoning energy production to stand up to Russia by calling on the president to loosen limits on US oil and gas exports to Europe. (FT)

Equities

French CAC index has outperformed its peers since the get-go, with Bouygues trading up 6.5% following reports that the company has agreed to sell its mobile network and much of its spectrum to Iliad for up to EUR 1.8bln as a way to head off competition regulators' concerns about its pending bid for Vivendi's SFR. Also of note, Rolls Royce shares opened up 2% following reports that Daimler will sell a 50% stake valued at GBP 1.9bln in an engine joint venture to partner with Rolls Royce holdings and to invest in its automotive and truck business. Despite the reversal in sentiment, basic materials remained the worst performing sector, with precious and base metal prices also trading lower.

FX

The risk averse sentiment which was evident overnight in Asia gradually ebbed, which in turn allowed the commodity linked AUD/USD to recover overnight losses, with EUR/CHF also moving into positive territory as market participants downplayed the implications of the latest Chinese Trade data on long-term outlook for the economy.

SNB's Chairman Jordan said the SNB will not exclude tools like negative rates; the SNB will not rule out taking further steps to ensure its monetary-policy stance remains appropriate. (BBG/Basler Zeitung)

Commodities

Base and precious metals have seen substantial weakness in overnight trade, retaining the trend seen on Friday, with iron ore entering a bear markets, copper plunging to multi-month lows and gold down following the release of Chinese trade balance data overnight.

Chinese demand for gold is seen as falling 17% this quarter, from 250 mt from 300 mt, as prices for the metal rally, according to the China Gold Association. (BBG)

Morgan Stanley lowered it 2014 average gold price forecast by 11.6% to USD 1160/oz and cut its 2015 forecast by 12.5% to USD 1138/oz. (RTRS)

Russian forces have tightened their control of Crimea on Sunday in spite of warnings from the US and its allies not to continue its military escalation or attempts to annex the peninsula. Russian troops took over a Ukrainian border post in the west of the region, detaining 30 Ukrainian troops, and now occupy a dozen such posts, according to the Ukrainian border guard. (FT)

Chinese Crude Oil Imports (Feb) 23.05mln tonnes, up 11% Y/Y, down 18.1% M/M. (DJN)

Libya's El Sharara oilfield has resumed production, with output gradually increasing, according to NOC. (BBG)