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It's Another Non-Virtual Futures Ramp In A Virtual Reality World

Tyler Durden's picture




 

Another morning melt up after a less than impressive session in China which saw the SHCOMP drop again reversing the furious gains in the past few days driven by hopes of more PBOC easing (despite China's repeated warning not to expect much). A flurry of market topping activity overnight once again, with Candy Crush maker King Digital pricing at $22.50 or the projected midpoint of its price range, and with FaceBook using more of its epically overvalued stock as currency to purchase yet another company, this time virtual reality firm Oculus VR for $2 billion. Perhaps an appropriate purchase considering the entire economy is pushed higher on pro-forma, "virtual" output, and the Fed's capital markets are something straight out of the matrix. Despite today's pre-open ramp, which will be the 4th in a row, one wonders if biotechs will finally break the downward tractor beam they have been latched on to as the bubble has shown signs of cracking, or will the mad momo crowd come back with a vengeance - this too will be answered shortly.

In Europe, shares rose and also traded close to intraday highs, with the autos and insurance sectors outperforming and telcos, real estate underperforming. The German and Spanish markets are the best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. Japanese 10yr bond yields rise; Greek yields increase.

Taking a brief look at overnight markets, EURUSD is holding at around the 1.382 level, but the lower USD vs EMFX theme over the last day or so has moderated. The IDR (-0.1%), CNH (-0.15%) and CNY (-0.15%) are all trading a bit weaker against the USD overnight. Asian equities are in positive territory again following the lead of the S&P 500 which closed at +0.44% yesterday. Chinese banks (+2.2%) are leading the Hang Seng China Enterprises Index (+1.8%) higher after a fairly solid set of results from Agricultural Bank of China which are partly allaying fears of an impending banking crisis in China. ABC reported profit growth of 14.6% YoY and at the same time management provided some reassuring comments on net interest margins and asset quality. Against expectations, non-performing loans fell by 0.2% QoQ and the NPL ratio fell to 1.22% as at Dec 2013 (vs 1.24% previous quarter). Management indicated that it expects NPLs to remain stable in 2014. The rest of China’s big four banks will be reporting earnings this week. The positive commentary from ABC stood in contrast to reports from another Chinese bank, small rural lender Jiangsu Sheyang Rural Commercial Bank, which yesterday suffered a deposit run at one of its branches after talk that it was insolvent (South China Morning Post). The bank has denied those rumours. Outside of China, the Nikkei (+0.3%) is trading somewhat cautiously ahead of a planned sales tax hike which will be instituted from next week onwards. The AUD is trading a multimonth highs against the USD (0.919) after the RBA’s Stevens said that there are encouraging signs of a transition from mining-led growth to domestic consumption.

On today’s calendar, there are a few economic releases on the radar plus an EU-US Summit in Brussels which may result in more noise around the Ukraine-Russia situation. A press statement is due at 11:30am London time. The Fed releases part two of its annual bank capital stress tests in the form of its Comprehensive Capital Analysis and Review. The main data releases is US durable goods, but ahead of that there is consumer confidence in Germany and Italy and employment data in France.


Bulletin News Summary from RanSquawk and Bloomberg

  • Bunds remained better bid this morning, supported by month-end related flow and also growing expectation of ECB enacting QE following commentary by ECB's Weidmann yesterday. This sentiment has also buoyed equity markets, with Eurostoxx50 trading up 1.05%
  • GBP outperformed EUR this morning after BoE's Weale said that wages are starting to grow and that rates won’t stay at 0.5% indefinitely
  • Treasuries steady as week’s auctions continue with $13b 2Y FRN and $35b 5Ys. 5Y yields 1.755% in WI trading; stopout at that level would be highest since May 2011.
  • 2Y auction yday was awarded at 0.469%, highest 2Y stop in almost three years; stop was 0.8bp lower than WI yield at 1pm according to Stone & McCarthy, biggest stop through by a 2Y since Feb. 2011
  • St Louis Fed’s James Bullard said policy makers haven’t committed to a specific month to end bond purchases even as it would take a significant shift in the outlook to alter the path of tapering
  • Reserve Bank of Australia Governor Glenn Stevens said there are encouraging early signs of a handover from mining-led demand growth to domestic consumption and the nation’s economy may strengthen later this year
  • Americans will get more time to enroll in Obamacare insurance plans if they started the process but were unable to complete it before the March 31 deadline
  • North Korea fired two ballistic missiles capable of reaching both Japan and South Korea as President Barack Obama hosted the first meeting between the leaders of the U.S.’s biggest Asian allies
  • Obama and Hillary Clinton’s vision for a globalized foreign policy and “reset” relations with Russia have been disrupted by Putin’s annexation of the Crimea and a Russian troop buildup along the Ukrainian border
  • Sovereign yields mostly lower. Nikkei +0.4%, Shanghai -0.2%. European equity markets, U.S. stock-index futures higher. WTI crude and gold higher; copper declines


US Economic Calendar

  • 7:00am: MBA Mortgage Applications, March 21 (prior -1.2%)
  • 8:30am: Durable Goods Orders, Feb., est. 0.8% (prior -1%); Durables Ex-Transportation, Feb., est. 0.3% (prior 1.1%); Capital Goods Orders Non-defense Ex-Air, Feb., est. 0.5% (prior 1.7%, revised 1.5%)
  • Capital Goods Shipments Non-defense Ex-Air, Feb., est. 0.8% (prior -0.8%, revised -1%)
  • 9:45am: Markit U.S. Composite PMI (prior 54.1); Markit U.S. Services PMI, est. 54.0 (prior 53.3) Central Banks
  • 4:00pm: Fed releases capital analysis and review results
  • 8:20pm: Fed’s Bullard speaks in Hong Kong Supply
  • 11:30am: U.S. to sell $13b 2Y FRN
  • 1:00pm: U.S. to sell $35b 5Y notes
  • 11:00am POMO: Fed to purchase $2.25b-$2.75b in 2021-2024 sector

Asian Headlines

Chinese equities trades lower by 0.4% in the final hour of trade, with investors remaining unnerved after the Chinese central bank and Sheyang state governor reassured depositors that their funds were safe after yesterday's reports on a localised Chinese bank run. Also of note, according to a Chinese government source, recent talk of Chinese government stimulus is hype and that there is no planned easing in the near future. Elsewhere, JGBs settled lower, with JGB swaps broadly higher amid a lack of buying power ahead of the fiscal year-end failed to offset good size selling of JGBs by investors and dealers in secondary market following BoJ's purchase of JPY 400bln in the 5 and 10y zones.

EU & UK Headlines

Little in terms of fresh EU related commentary, but Euribor curve flattened and EONIA ECB dates curve inverted as market participants speculated of ECB enacting on QE following comments by ECB's Weidmann yesterday. Analysts' take this morning:

- Barclays have suggested that comments by the usually hawkish central banker indicate that the ECB probably has consensus to take decisive steps including QE if it sees a need from increasing deflationary risks, however, these risks are not seen as high enough currently.

- Goldman Sachs see a chance of an ECB rate cut at the April meeting (not a new scenario), but this will require a rise in fwd yields, inflation rate needs to ease further in March and EUR/USD to appreciate close to 1.4000 level.

- RBS are of the opinion that QE by the ECB remains a measure of last resort.

Barclays preliminary pan-Euro agg month-end extensions: (+0.07y) (12m avg. +0.08y)

Barclays preliminary Sterling month-end extensions:(-0.02y) (12m avg. +0.06y)

US Headlines

Even though USTs traded steady this morning, 2/5s US swaps steepened this morning on prospect of a decent 5y note sale by the US Treasury later today. The front-end was particularly active on touted liquidation flows following somewhat lacklustre 2y sale yesterday where yield stopping through the WI by 0.8bps, and dealers left with just 37.5% of the issue.

Fed's Plosser (voter, hawk) spoke overnight and said the economy has recovered enough for tighter policy, adding that a 6 month period for a rate hike after the end of QE is not automatic. Plosser added that reducing IOER to zero wouldn't make much difference.

Barclays preliminary US Tsys month-end extensions:(+0.07y) (12m avg. +0.08y)

Equities

Stocks in Europe are seen broadly higher, with all ten sectors trading in the green now. However the FTSE-100 index has underperformed its peers throughout the session, weighed on by Lloyds (-4%) after the government announce a stake sale. In terms of US related commentary, Facebook has announced that it is to buy the virtual-reality headset Co. Oculus for USD 2bln.

FX

USD/JPY has traded sideways throughout the European session as price gravitates around 102.30 with USD 4bln option expires at 102.00, 102.15, 102.30, 102.40 which rolls off at the NYC cut at 1400GMT. AUD/USD was supported overnight in Asia following comments from RBA governor Stevens who reiterated expectations of a period of stability for interest rates and refrained from talking down the AUD, the upside price action continued this morning in Europe, with the pair advancing to its highest level since late November. Elsewhere, GBP has outperformed EUR, benefiting from comments made by BoE's Weale.

Commodities

There was little in terms of commodity related commentary, but the Houston Shipping channel is gradually re-opening after a four day closure which caused a backlog of more than 100 vessels. (RTRS)

Yesterday's API data is as follows:

- US API Crude Oil Inventories (Mar 21) W/W 6280k vs. Prev. 5920k
- Cushing Crude Inventories (Mar 21) W/W -1030k vs. Prev. -1040k
- Gasoline Inventories (Mar 21) W/W -2840k vs. Prev. -1410k
- Distillate Inventories (Mar 21) W/W 267k vs. Prev. -674k

In base and precious metal news, Russia and Turkey have raised their holdings in gold in February, according to the IMF. Russia raised their gold holdings by 233,000 oz, Turkey by 299,000 oz while Mexico cut theirs by 3,000 oz. Also of note, Australia has cut their 2013/14 iron ore exports forecast as they see prices fall. Forecasting iron ore price for 2015 at USD 103/tonne. (RTRS)

Wrapping up, here is the overnight summary by DB's Jim Reid

As we've been discussing over the last couple of days, we've become a bit more worried of late about what might happen to markets in the second half of the year due to a more hawkish Fed than we expected and an ECB that seemed stuck after what looked like a promising pre-emptive rate cut in November last year. However we only tweaked our still bullish spread forecasts slightly as we felt there was still time for central banks to become more dovish again. Well yesterday some members of the ECB broke their silence to perhaps signal a softening of their stance. Ironically of all the ECB speakers yesterday, it was Draghi (the last speaker) who appeared the least dovish. He argued that current monetary policy will start to become more effective as the economy recovers. He did say that the ECB stands “ready to take additional monetary policy measures” but only if any downside risks to this scenario appear” adding that “right now we think that the risks of having deflation are limited”.

This came after the Bundesbank’s Weidmann had indicated that he wouldn't rule out QE in Europe. Specifically he said the ECB could consider QE, but that it has to be considered with respect to the costs and side-effects. He signalled that he sees no immediate need for fresh intervention but also kept the door open on negative interest rates in order to counter a strong Euro. In addition to Draghi and Weidmann, ECB governing council members Liikanen, Makuch and Visco all warned on the dangers of deflation and suggested that the ECB is prepared to act decisively through non-standard measures or further rate cuts.

Due to all the commentary yesterday, the Euro saw a wild ride as a result - trading down 0.64% to 1.3750 at the lows before bouncing back strongly to close at 1.382. So although the rhetoric did talk down the Euro for a while it will likely need actual action to make a difference. However at least yesterday saw ground for hope for those looking for a better deflation firebreaker from the ECB.

While we watch the policymakers at the ECB and Fed, we should also highlight the importance of policymakers in China and their potential reaction to recent disappointing economic data and leading indicators. Following the weaker than expected HSBC flash manufacturing PMI on Monday, a number of commentators have been calling for policymakers to loosen policy either through fiscal or monetary means. The prospect of stimulus has provided a bit of a boost to domestic equities since late last week (Shanghai Comp +3.7% since Friday). However from a fiscal standpoint, Finance Minister Lou Jiwei said last week that the government will not resort to fiscal policies to boost growth and will instead focus on the quality of growth. This has been partly countered by recent suggestions from the State Council that they could accelerate programs in a bid to shore up growth in the immediate term. On the monetary side, our Chinese rates strategist Linan Liu asks the question whether we could see a RRR cut in China in Q2. Linan concludes that the chances of an RRR cut in Q2 are rising given potential capital outflows from China in the coming months and a breakdown in the transmission between falling money market rates to lower financing costs for the real economy. For the time being, it appears that the balancing act between carrying out reforms and loosening policy is still being played out in China, with important consequences for near term growth.

Taking a brief look at overnight markets, EURUSD is holding at around the 1.382 level, but the lower USD vs EMFX theme over the last day or so has moderated. The IDR (-0.1%), CNH (-0.15%) and CNY (-0.15%) are all trading a bit weaker against the USD overnight. Asian equities are in positive territory again following the lead of the S&P 500 which closed at +0.44% yesterday. Chinese banks (+2.2%) are leading the Hang Seng China Enterprises Index (+1.8%) higher after a fairly solid set of results from Agricultural Bank of China which are partly allaying fears of an impending banking crisis in China. ABC reported profit growth of 14.6% YoY and at the same time management provided some reassuring comments on net interest margins and asset quality. Against expectations, non-performing loans fell by 0.2% QoQ and the NPL ratio fell to 1.22% as at Dec 2013 (vs 1.24% previous quarter). Management indicated that it expects NPLs to remain stable in 2014. The rest of China’s big four banks will be reporting earnings this week. The positive commentary from ABC stood in contrast to reports from another Chinese bank, small rural lender Jiangsu Sheyang Rural Commercial Bank, which yesterday suffered a deposit run at one of its branches after talk that it was insolvent (South China Morning Post). The bank has denied those rumours. Outside of China, the Nikkei (+0.3%) is trading somewhat cautiously ahead of a planned sales tax hike which will be instituted from next week onwards. The AUD is trading a multimonth highs against the USD (0.919) after the RBA’s Stevens said that there are encouraging signs of a transition from mining-led growth to domestic consumption.

Looking more broadly at EM in general, the stability of the EM complex over the last week or so has probably surprised many. With the more-hawkish-thanexpected March FOMC now almost a week behind us, a number of EM assets are in fact trading at stronger levels than they were going into last Wednesday’s meeting. Indeed if we compare Tuesday 18th to Tuesday 25th closes, EM credit (CDX EM index -15bp) and EM equities (MSCI EM +0.6%) have performed resiliently. The story is fairly consistent in individual assets across EMEA, Asia and LATAM with the Ibovespa (+4.4%), HSCEI (+3.7%), Turkish lira (+0.1%), Mexican peso (+0.3%) and Russia 5yr CDS (-10bp) all trading firmer during the past week. Even a rating downgrade from S&P failed to dampen the price action in Brazilian CDS and the BRL yesterday, with both closing tighter/firmer as investors unwound short positions throughout the day. The jury appears split here – some think we are seeing a delayed reaction to the Fed, while others believe that EM’s lower valuation or lighter positioning has made the asset class better able to withstand the commentary from the Fed.

Speaking of the Fed, the Philly Fed’s Charles Plosser (a FOMC voter and a hawk) was the latest Fed official to confirm Yellen’s heavily-debated “six months” statement. Plosser argued yesterday that Yellen did not make a mistake when she said that there may be around six months between the end of QE and first rate hikes. Plosser also said that the six months time frame was already expected in markets, but conceded that it was data dependent. Though he is a noted hawk, it was interesting to see that Plosser thinks the rates will rise to 4% in 2016. This was at odds with the Atlanta Fed’s Dennis Lockhart, who said yesterday that the Fed will likely begin raising rates in the second half of 2015, and that the six months timeframe was really a minimum.

On today’s calendar, there are a few economic releases on the radar plus an EU-US Summit in Brussels which may result in more noise around the Ukraine-Russia situation. A press statement is due at 11:30am London time. The Fed releases part two of its annual bank capital stress tests in the form of its Comprehensive Capital Analysis and Review. The main data releases is US durable goods, but ahead of that there is consumer confidence in Germany and Italy and employment data in France.

 

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Wed, 03/26/2014 - 07:17 | 4593120 Headbanger
Headbanger's picture

Blah blah bl;ah blah blah..

Equities will plummet today!

And keep going down for a loooong time

Wed, 03/26/2014 - 07:19 | 4593127 GetZeeGold
GetZeeGold's picture

 

 

Raoul Duke: We had two bags of grass, seventy-five pellets of mescaline, five sheets of high-powered blotter acid, a saltshaker half-full of cocaine, and a whole galaxy of multi-colored uppers, downers, screamers, laughers... Also, a quart of tequila, a quart of rum, a case of beer, a pint of raw ether, and two dozen amyls. Not that we needed all that for the trip, but once you get locked into a serious drug collection, the tendency is to push it as far as you can.

Wed, 03/26/2014 - 07:28 | 4593133 negative rates
negative rates's picture

They always did a propensity for finding new ways to kill themselves.

Wed, 03/26/2014 - 07:54 | 4593149 dontgoforit
dontgoforit's picture

Art imitating life; life imitating art. Wouldn't want to spend my time with one of those puppies strapped to my face; you'd be 'googleyfried.'  Don't need no blow...

Wed, 03/26/2014 - 08:00 | 4593160 Looney
Looney's picture

Someone should come up with a wearable beer keg, something like a full-face motorcycle helmet, but without an opening ;-)

Wed, 03/26/2014 - 08:15 | 4593179 Market Rage
Market Rage's picture

I can't tell if you're serious, but I agree.  I don't think it ends well today.

Wed, 03/26/2014 - 07:16 | 4593122 Australian Economist
Australian Economist's picture

Candy Crush, this has to be the most delusional IPO I've seen this year, it will not end well. 

Wed, 03/26/2014 - 07:17 | 4593124 Max Damage
Max Damage's picture

And when a big miss on Italain retail sales crossed the wires the EU markets spiked up. What a complete farce. All macro data missed except the leg over survey, and all you hear on the fake news is how the leg over survey boosts stocks!!!!

Bullshit feeding on bullshit

Wed, 03/26/2014 - 07:17 | 4593125 Bearwagon
Bearwagon's picture

This is simply ludicrous ....

Wed, 03/26/2014 - 07:19 | 4593128 El Hosel
El Hosel's picture

Green Machine Green Machine Green Machine

Wed, 03/26/2014 - 07:21 | 4593129 Headbanger
Headbanger's picture

And going plaid !

Look out for the sudden stop!

Wed, 03/26/2014 - 07:22 | 4593126 firstdivision
firstdivision's picture

We're saved.  All is right with the world, cause equities are up. 

The AUD$ has had one hell of a run, especially considering the slow down in China has kinda neutered demand for raw materials.  Must be supported by hose'sustainable' housing prices.

Wed, 03/26/2014 - 07:23 | 4593131 Yen Cross
Yen Cross's picture

   The mortgage applications print was - 3.5%. I guess it was the weather, or a volcano, or alien invasion?

Wed, 03/26/2014 - 07:30 | 4593135 pomlad5
pomlad5's picture

no, Russian invassion

Wed, 03/26/2014 - 07:58 | 4593155 _ConanTheLibert...
_ConanTheLibertarian_'s picture

The threat of a Russian invasion will do.

Wed, 03/26/2014 - 07:29 | 4593134 franciscopendergrass
franciscopendergrass's picture

Having a blindfold on, having VR goggles, watching Dancing with the Stars, and watching sports on TV all have the same effect; you can't see what is going on around you.  People are so consumed by trival BS.

Wed, 03/26/2014 - 07:36 | 4593138 skwid vacuous
skwid vacuous's picture

I hope he's watching porn, otherwise no reason for the shit-eating grin on his face

Wed, 03/26/2014 - 07:56 | 4593153 dontgoforit
dontgoforit's picture

Probably watching "Wolf of Wall St."

Wed, 03/26/2014 - 07:46 | 4593141 sudzee
sudzee's picture

As fiat looses to inflation there is no reason why markets can't add many more zeros to current valuations. Zimbabwe rose 12,000 % in 2006-2007. Chart falling fiat/market valuation and you see where all markets are going.

Wed, 03/26/2014 - 08:21 | 4593186 ncdirtdigger
ncdirtdigger's picture

Stocks went very high in Weirmar too

Wed, 03/26/2014 - 08:10 | 4593173 Dr. Engali
Dr. Engali's picture

Like I keep saying; as crazy as it is the market is a policy tool, and as long as it remains that way every dip is to be bought and profits are to be taken. When this finally ends it will be in a flash and there will be no escaping it.

Wed, 03/26/2014 - 08:49 | 4593253 BabylonDeer
BabylonDeer's picture

I just wonder..

Where are those FB guys heading with all this  acquisitions? 

I mean:

They acquired Whatsapp (lots and lots of REAL users with theyr REAL phone number and all their private messages(which is like one of the biggest chat programs that people uses)

They acquired that drone maker (so they now have eyes up there)

Now they bought a virtual reality googles company....

You know what this will end up looking like for me?

Let's check this guy records and life..

http://machineoverlords.com/wp-content/uploads/2012/06/minority-report.jpg

Wed, 03/26/2014 - 10:15 | 4593507 disabledvet
disabledvet's picture

Again...there's nothing "virtual" about this meltup.
http://en.wikipedia.org/wiki/Gypsy_(Fleetwood_Mac_song)

these folks are "sticking America out in public" to get their pathetic and now worthless (formerly copper) penny. (That's right New York City...you're gonna a need 10 ten trillion in the Rockefeller Wishing Well this time.)
http://en.wikipedia.org/wiki/Gypsy_(Fleetwood_Mac_song)

they've got their bankers jumping out windows, their corporate boards being "chaosed." really a truly pathetic show of an otherwise doomed peoples.

here's the only reason these phucks ever came to America in the first place:
http://www.youtube.com/watch?v=py3w5fttedA
and in the end...well, they've got video feed.

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