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It's Op-Ex Day, And The Buying Panic Is Late

Tyler Durden's picture




 

After a solid day for risk yesterday, surging higher on a continuation of the rumor that Japan's economy will deteriorate so much the BOJ will have to print more money (even though overnight ex BOJ governor Sekido said Kuroda won't print more) we have a more cautious tone this morning heading into the Easter long weekend. A double earnings miss from Google and IBM following the US market close, comments from the Chinese Premier suggesting that the government will keep its policy settings unchanged, and a press conference from Russia’s President Putin in which the Russian president as expected, has refused to back down, has put a small dampener on sentiment today. Add the fact that due to Good Friday April equities Op-Ex will take place today and trading in the next 9 hours promises to be more unrigged than ever, especially if the NY Fed trading desk manages to slam the VIX into single-digit territory.

Some detail: Stocks in Europe (Eurostoxx50 -0.5%) failed to benefit from a positive close on Wall Street, as a combination of less than impressive earnings on both sides of the pond, together with position squaring ahead of the long weekend weighed on sentiment. Asian equities traded relatively flat with a lack of newsflow to guide price action.

GBP/USD has printed its highest reading in 5 years as markets continue to hold a bullish view on the time frame for a BoE rate hike.

Going forward, the key event is the start of a two-day, four-party summit with the foreign ministers from the US, EU, Russia and Ukraine begins today in Geneva to discuss the ongoing situation in Ukraine, and will help determine the likelihood of further sanctions against Russia in the short term – this might determine how markets open early next week. In terms of data, most of the focus will be on US jobless claims and the Philly Fed outlook survey. Consensus is expecting a small increase to 10.0 (from 9.0 previous) in the latter. There are plenty of US corporates due to announce earnings before the NY opening bell, including Morgan Stanley, Goldman Sachs and General Electric. It’s a 4 day weekend in much of continental Europe and the UK but equity and bond markets in the US will reopen on Monday.

Bulletin summary headlines from Bloomberg and RanSquawk

  • Treasuries little changed in pre- holiday trading, with 30Y yields lower by ~3bps on the week, 2Y and 10Y little changed, 3Y-7Y yield higher by 3.6bps-6bps amid Ukraine violence, China growth concern, Yellen comments that Fed will remain accommodative.
  • Ukrainian forces killed three pro-Russian militants after an attack on a national guard base in the country’s east as the U.S. and its European allies sat down with Ukraine and Russia to discuss the crisis
  • Putin rejected claims from Ukraine that he’d deployed troops there and said he would fight to defend compatriots in other countries
  • China’s slump in property sales and construction is spurring speculation that the government’s four-year-old campaign of real-estate controls will start to crack
  • China’s interest-rate swaps fell by the most since June after the government said it will lower reserve-requirement  ratios at some rural banks
  • Malcolm Young, a founding member and guitarist of Scottish- Australian rock band AC/DC, will take a break from playing due to ill health, while the group has pledged to keep making music
  • Sovereign yields mostly higher; EU peripherals rally. Asian stocks mixed; Nikkei little changed while Shanghai -0.3%. European equity markets, U.S. stock futures decline. WTI crude and copper higher, gold lower

US Event Calendar

  • 8:30am: Initial Jobless Claims, April 12, est. 315k (prior 300k); Continuing Claims, April 5, est. 2.780m (prior 2.776m)
  • 9:45am: Bloomberg Economic Expectations, April (prior -12)
  • 9:45am: Bloomberg Consumer Comfort, April 13 (prior -31.9)
  • 10:00am: Philadelphia Fed Business Outlook, April, est. 10 (prior 9)
  • NO POMO today

EU & UK Headlines

The European session has seen a distinct lack of tier 1 macroeconomic data or significant economic commentary. Following the below 7% unemployment reading from the UK yesterday, Gilts have underperformed with the short-sterling curve steepening as participants continue to bring forward their expectations of a rate hike by the BoE. However, this price action in Gilts has failed to filter through into Bunds given the subdued nature of current markets.

US Headlines

IBM and Google shares traded lower in after-market hours, with IBM reporting a fall in sales and Google coming short of analysts expectations for paid clicks.
In terms of earnings, focus will be on Goldman Sachs and Philip Morris.

Equities

The tech sector led the move lower in Europe, with SAP down over 3% following earnings report pre-market. Utilities have also traded in the red throughout the session following a disappointing earnings update from Diageo. Of note, today also marks the expiration of various equity option contracts in both Europe and the US

FX

In Asia-Pacific trade, GBP/USD rose through upside stops on its way through yesterday’s highs to print its highest level since 2009 at 1.6837, with the European session seeing an extension of these gains to the 1.6842 level.

Commodities

In his annual Q&A with public, Russian President Putin said that he hopes he won't have to send troop into eastern Ukraine, adding that he will do everything possible to help east Ukraine population defend their rights.

Libya’s Oil Minister said on Wednesday there was no clear timetable for the restart of a steady output flow. Libya’s Hariga oil port, 110kbpd capacity, started loading its first shipment of 1mbbls yesterday. (RTRS)

Senators are urging the Fed to ban US banks from owning commodity assets saying that their ownership threatens the global supply chains. (BBG)

* * *

DB's Jim Reid concludes this overnight summary

In Asia, equities are trading with a mixed tone while overall volumes are on the low side. Premier Li’s comments late yesterday reiterating the government’s commitments to reforms hasn’t inspired Chinese equities (Shanghai Comp flat). However domestic swap rates have fallen after the Chinese State Cabinet said that it would loosen reserve requirements for qualifying rural banks aimed at stimulating growth. In Japan, there is again some focus on the Government Pension Investment Fund, after the head of the GPIF advisory panel advocated that the fund should sell down longer dated JGBs and increase its allocation to equities in the coming months. The comments haven’t had a large effect on Japanese bond yields. The Nikkei is down 0.1%, while dollar-yen is down 0.3% at just under 102. A firmer session for EM yesterday has spilled over into Asia where INR (+0.1%), IDR (+0.1%) and EM equities are trading stronger.

Yesterday’s Economic Club of NY speech by Janet Yellen contained little new information, but it perhaps provided reassurance in the Fed Chair’s dovish bias. Yellen’s speech was centred on three topics - namely the degree of slack in the labor market, the path of inflation, and downside risks to the economic recovery. On the first two topics, Yellen took on a dovish tone, saying that “the larger the shortfall of employment or inflation from their respective objectives, and the slower the projected progress toward those objectives, the longer the current target range for the federal funds rate is likely to be maintained”. On the third question about downside risks, she highlighted the period from 2010 to 2012 where the Fed’s economic forecasts were later disrupted by downside surprises. Yellen also further played down the six months time frame between QE end and rate rises saying in response to a question that the Fed will “respond to what we see happening, and not a fixed idea that we perhaps held at some earlier time about will come to pass”. The overall message was that at the end of the day policy will be data dependent and that this is the most important factor determining monetary policy.

After a couple of days of seemingly good corporate results announcements, yesterday’s earnings had a more negative tone highlighted by Google and IBM’s after-market earnings misses. Google’s stock fell more than 4% in aftermarket trading after the company missed earnings and revenue estimates. In addition to that there appeared to be some concern over Google’s rising cost base following recent acquisitions and a recent deceleration in mobile advertising revenues. Outside of the tech companies, BofA (-1.6%) also performed poorly after disclosing surprise losses due to legal costs from mortgage disputes. The bank also reported lower Q1 NIMs and FICC revenues (down 15%).

We’re still in the early stages of the Q1 earnings season with only 11% of the S&P 500’s constituents having reported results so far. However tallying up the results to date, we’re seeing around 65% of companies beating analyst estimates versus only 33% who have missed (2% in line). Of the companies that have beaten estimates, the average beat is fairly large at an average of 8.5% (median 5.0%). Interestingly, despite the recent selloff in tech stocks, it’s actually the technology sector which has the strongest beat:miss ratios at the moment. While just under two-thirds of companies are beating estimates, we should should note that according to DB’s equity strategist Q1 earnings estimates have been cut sharply in recent months. Over the last 3 years the average cut during the quarter was 3-4%, during 1Q it was 5.3%. The performance of companies on the revenue line is relatively weaker - just under half (49%) of companies have managed to beat expectations, versus 51% who have missed. So certainly some mixed messages coming out of the US reporting season so far. For more detail, our usual earnings tracker table is included in today’s PDF.

10yr US treasury yields remain at the bottom of recent trading ranges and they rallied a couple of basis points following Yellen’s speech yesterday. Before that however, yields reached a high of 2.66%, spurred by an above-consensus US March industrial production report (+0.7% versus consensus of 0.5%) which contained upward revisions to prior month’s data (up +0.6% to +1.2%). Housing data was a bit softer than expected but this was largely ignored. Housing starts in March rose 2.8% (vs 7.0% expected) to 946k in March after February was revised slightly higher to 920k versus 907k previously. Weather affected states in the mid-west and North-east rebounded strongly. Housing permits, which are less weather-distorted, were down 2.4% to 990k units. The Fed Beige book confirmed that economic growth in most US regions had increased with the improvement in the weather.

Turning to the day ahead, liquidity will again be patchy in some markets as we head into the long weekend. President Putin will hold an annual televised “direct line” Q&A with the media & public today at around 9am London time in which the main line of questioning is likely to be on the Ukrainian crisis. A twoday, four-party summit with the foreign ministers from the US, EU, Russia and Ukraine begins today in Geneva to discuss the ongoing situation in Ukraine, and will help determine the likelihood of further sanctions against Russia in the short term – this might determine how markets open early next week. In terms of  data, most of the focus will be on US jobless claims and the Philly Fed outlook survey. Consensus is expecting a small increase to 10.0 (from 9.0 previous) in the latter. There are plenty of US corporates due to announce earnings before the NY opening bell, including Morgan Stanley, Goldman Sachs and General Electric. It’s a 4 day weekend in much of continental Europe and the UK but equity and bond markets in the US will reopen on Monday.

 

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Thu, 04/17/2014 - 07:07 | 4668717 GetZeeGold
GetZeeGold's picture

 

 

Wake up.....you're missing it!

Thu, 04/17/2014 - 07:26 | 4668734 negative rates
negative rates's picture

I think the clock  is slow.

Thu, 04/17/2014 - 07:30 | 4668740 GetZeeGold
GetZeeGold's picture

 

 

I don't feel tardy.

Thu, 04/17/2014 - 07:33 | 4668743 negative rates
negative rates's picture

And I don't look tardy.

Thu, 04/17/2014 - 07:51 | 4668788 max2205
max2205's picture

' We're on the highway to hell'......

Thu, 04/17/2014 - 08:49 | 4668999 therover
therover's picture

Class dismissed.

Thu, 04/17/2014 - 07:12 | 4668720 NoDebt
NoDebt's picture

"Malcolm Young, a founding member and guitarist of Scottish- Australian rock band AC/DC, will take a break from playing due to ill health,"

Except for that little tidbit, everything else looks bullish to me.  How did that get in our morning financial update??  Not complaining, but what an oddball thing to show up in this article.

Thu, 04/17/2014 - 07:35 | 4668744 mvsjcl
mvsjcl's picture

Dirty Deeds just got cheaper, that's why.

Thu, 04/17/2014 - 08:55 | 4669027 therover
therover's picture

"Ain't No Fun (Waiting Round To Be A Millionaire)"

The following is a true story
Only the names have been changed
To protect the guilty

Well I left my job in my home town
And I headed for the smoke
Got a rock 'n' roll band and a fast right hand
Gonna get to the top
Nothing's gonna stop us, no nothing

So if you've got the money, we've got the sound
You put it up and we'll put it down
If you've got the dollar, we've got the song
Just wanna boogie woogie all night long
Yeah boogie

I got holes in my shoes
I got holes in my teeth
I got holes in my socks
I can't get no sleep
I'm trying to make a million

And I got patches on the patches
On my old blue jeans
Well they used to be blue
When they used to be new
When they used to be clean

But I've got a Mumma who's a hummer
Just keeping me alive
While I'm in the band doing drinking with the boys
She's working 9 to 5
She knows her place that woman

Just you wait
One of these days see me driving round town
In my Rock 'n' Rolls Royce with the sun roof down
My bottle of booze, no summer time blues
Shouting out, "Look at me"
In my rock 'n' roll voice

No it ain't no fun, yeah
Waiting round to be a millionaire
No it ain't no fun
Waiting round to be a millionaire

Do you believe me
It ain't no fun, no
Waiting round to be a millionaire
It ain't no fun, I don't care what they say
Waiting round to be a millionaire

Drive a Rolls Royce car
No it ain't no fun, and you know it
Waiting round to be a millionaire
No, no, no, no , no, no, no
No, ain't no fun
Waiting round to be a millionaire

Got a million dollar scream
But it ain't no fun, (ain't no fun), oh no
No it ain't no fun, (ain't no fun), that's what I said
But it ain't no fun, (ain't no fun), and I wanna be rich
No it ain't no fun, (ain't no fun), ain't no fun digging this bitch
Ain't no fun waiting round to be a millionaire, you better believe me
Ain't no fun waiting round to be a millionaire
Ain't no fun waiting round to be a millionaire
No it ain't no fun waiting round to be a millionaire
No it ain't no fun (ain't no fun)
No it ain't no fun (ain't no fun)
I ain't having no fun (ain't no fun)
No it ain't no fun (ain't no fun)
Ain't no fun waiting round to be a millionaire, no no
Ain't no fun waiting round to be a millionaire
Ain't no fun waiting round to be a millionaire
No it ain't no fun waiting round to be a millionaire

"Hey Hello Howard, how ya doin'?
"Next door neighbour?"
"Oh yeah... Get your fuckin' jumbo jet off my airport"

(Ain't no fun, ain't no fun)
No it ain't no fun, (ain't no fun)
Hey it ain't no fun, (ain't no fun)
No it ain't no fun, (ain't no fun)
Ain't no fun waiting round to be a millionaire
Ain't no fun waiting round to be a millionaire
No it ain't no fun, no it ain't no fun, ain't no fun
(Ain't no fun waiting round to be a millionaire)
(Ain't no fun...)

Thu, 04/17/2014 - 09:52 | 4669248 Iam_Silverman
Iam_Silverman's picture

" How did that get in our morning financial update??"
The chair is against the wall.  John has a long mustache.

Thu, 04/17/2014 - 07:18 | 4668728 disabledvet
disabledvet's picture

"There's the dumb money and then there's just the old plain idiotic stupid people."

Thu, 04/17/2014 - 07:32 | 4668742 negative rates
negative rates's picture

Where do you fit in there?

Thu, 04/17/2014 - 07:24 | 4668732 overmedicatedun...
overmedicatedundersexed's picture

Tyler's, fox news is reporting S&P got the go ahead from a Fed Judge in it's case vs SEC for blackmail and intimidation in it's down grade of .gov debt...moody's and buffett are called co conspirators in the case!!

Thu, 04/17/2014 - 08:05 | 4668825 overmedicatedun...
overmedicatedundersexed's picture

just imagine S&P gets the documents it want's in it's case vs the SEC, they could open up the whole corrupt bond markets to everyone's view..this is a very dangerous case for the Banksters and corrupt .gov elite.

Thu, 04/17/2014 - 08:31 | 4668912 TheReplacement
TheReplacement's picture

LOL like that'll happen.  Those docs are probably in the same shredder they used for Fast and Furious and all the other scandals.

Thu, 04/17/2014 - 08:42 | 4668961 overmedicatedun...
overmedicatedundersexed's picture

I assume the Tylers will bring this case up in a thread, as it is at the very core of what started ZH, as to S&P getting the docs, sadly much like congress getting IRS emails , it takes years, (per IRS head, LOL)

Thu, 04/17/2014 - 07:28 | 4668737 Joenobody12
Joenobody12's picture

Obama needs to stir up the shit pot more if he wants his GLD calls to rise. 

Thu, 04/17/2014 - 07:35 | 4668745 valley chick
valley chick's picture

News that only matters....No POMO + Ukraine + US long holiday weekend = would not go long.

Have a nice holiday!

/sarc

Thu, 04/17/2014 - 07:57 | 4668798 ...out of space
...out of space's picture

Senators are urging the Fed to ban US banks from owning commodity assets saying that their ownership threatens the global supply chains.

 

hmm.. 

this one is interesting


Thu, 04/17/2014 - 07:59 | 4668803 The worst trader
The worst trader's picture

If the Vix gets slammed today I will personaly go find Kevin and tie his balls in a knot.

Thu, 04/17/2014 - 08:04 | 4668821 Rising Sun
Rising Sun's picture

GOOG was down over 3% on their shit results.

 

Now GOOG is down 1.5%.

 

GOOG will be green by the end of the day.

 

There's no sellin' cause of that cunt Yellen!!!!!!!!!

Thu, 04/17/2014 - 08:20 | 4668878 Squid Viscous
Squid Viscous's picture

and the futures go from -8 to green... lol

Thu, 04/17/2014 - 08:50 | 4669005 jubber
jubber's picture

DAX from 9275 red to 9389 green LOL  even with Ukraine going into the weekend , crazy

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