This page has been archived and commenting is disabled.

Overnight Equity Futures Algos Jittery After Discovering Dubai On The Map

Tyler Durden's picture




 

Judging by the surprising reversal in futures overnight, which certainly can not be attributed to the latest data miss out of Europe in the form of the June German IFO Business Climate report (print 109.7, Exp. 110.3, Last 110.4) as it would be naive to assume that centrally-planned markets have finally started to respond as they should to macro data, it appears that algos, with their usual 24 hour delay, have finally discovered Dubai on the map. The same Dubai, which as we showed yesterday had just entered a bear market in a few short weeks after going turbo parabolic in early 2014. It is this Dubai which crashed another 8% just today, as fears that leveraged traders are liquidating positions, have surfaced and are spreading, adversely (because in the new normal this needs to be clarified) to other risk assets, while at the same time pushing gold and silver to breakout highs. Recall that it was Dubai where the global sovereign crisis started in the fall of 2009 - will Dubai also be the place where the first domino of the global credit bubble topples and takes down the best laid plans of central-planners and men?

European equity markets have paused for breath (Euro Stoxx 50 -0.1%), with core European indices trading flat ahead of the US open, with eyes turning to the looming Fed speakers, with both Williams and Plosser due on the docket. This comes despite underperformance in the FTSE MIB (-0.7%) as Italian banks remain under pressure. Further cross-border M&A based on tax benefits has lifted specific stocks today, with Switzerland’s Syngenta the latest to gain on reports that Monsanto had tabled a USD 40bln bid for the Co. two months ago.

JGBs traded 5 ticks higher at 145.43 despite underperformance in the long-end, as 30yr yields rose to their highest level since January 7th. The Nikkei 225 (+0.05%) recovered from early weakness with JPY as a main driver for price movement. Shanghai Comp (+0.47%) led by consumer shares, while the Hang Seng (+0.33%) bounced back from its biggest loss in three months yesterday.

Oil extends its decline as Iraqi army victories damped concern the nation’s crude supplies will be disrupted. Also adding to Oil's losses was a Putin proposal to government to end the resolution for using force in Ukraine, which appears set to pass tomorrow.

U.S. futures are also little changed, Asian stocks gain. Treasuries advance ahead of reports that economists said will show new-home sales slowed and GDP contracted more than originally estimated.

U.S. S&P/Case-Shiller home price index, consumer confidence, FHFA house price index, new home sales, Richmond Fed index, due later.

Bulletin headline summary from RanSquawk and Bloomberg

  • GBP underperforms as BoE’s Carney suggests a rate hike can only occur once slack in the economy has been reduced, which has dampened expectations of a near-term hike.
  • Risk-off tone following weak IFO report from Germany and concerns in the Middle-East over the Dubai stock index losing another 8% on a slowing property market.
  • Focus turns to the first Fed official comments since last week’s decision with Plosser (Voter, Hawk) and Williams (Voter, Dove) due to speak
  • Treasuries gain before week’s auctions begin with $30b 2Y notes, yield 0.508% in WI trading. Stopout at that level would be highest since May 2011.
  • Ifo institute’s index of German business confidence fell to 109.7 in June, weakest level this year, from 110.4 in May, amid signs of slower growth in Europe’s largest economy
  • Bank of England Governor Mark Carney said policy makers can wait for the economy to absorb more slack before increasing interest rates, and insisted such a move will be guided by economic data
  • Norway’s $880 billion wealth fund, the world’s largest, will expand its scope of investments to target “frontier markets” and add more currencies to generate higher returns
  • U.S. Secretary of State John Kerry arrived in the capital of Iraq’s semi-autonomous Kurdish region in his bid to prod the country’s leaders to unite against an al-Qaeda offshoot that has seized control over swaths of the country
  • Kerry said Obama is gathering the information he’d need if he decides to order airstrikes to counter the ISIS  advance
  • Dissatisfaction with Obama’s conduct of foreign policy has shot up among both Republicans and Democrats in the past month, even though a slim majority supports his recent decision to send military advisers to Iraq, according to the latest New York Times/CBS News poll
  • Russia’s Putin asked lawmakers in Russia’s upper house of parliament to rescind approval they granted to use force in Ukraine
  • The U.S. Supreme Court largely upheld the EPA’s requirement for emitters of gases tied to climate change -- backing the rules for large facilities, while barring them for smaller polluters such as apartment buildings, schools or restaurants
  • Hilary Clinton will speak in Denver at a Clinton Global Initiative forum on “economic justice” as she tries to rebound from a round of comments in which she  suggested that she and former President Bill Clinton aren’t really rich; daughter Chelsea, married to a hedge-fund manager, recently said she’s incapable of caring about money
  • Sovereign yields lower. EU peripheral spreads tighter. Asian stocks gain, European stocks mostly lower. U.S. stock futures decline. WTI crude lower, copper little  changed, gold higher

US Event Calendar

  • 9:00am: FHFA House Price Index, April, est. 0.5% (prior 0.7%)
  • 9:00am: S&P/Case-Shiller 20 City m/m, April, est. 0.8%  (prior 1.24%)
    • S&P/CS Composite 20 Cities y/y, April, est. 11.5% (prior 12.37%)
    • S&P/CS Home Price Index, April, est. 169.09 (prior 166.8)
  • 10:00am: Consumer Confidence Index, June, est. 83.5 (prior 83)
  • 10:00am: Richmond Fed Manufacturing Index, June, est. 7 (prior 7)
  • 10:00am: New Home Sales, May, est. 439k (prior 433k)
    • New Home Sales, m/m, May, est. 1.4% (prior 6.4%)
  • 11:00am POMO: Fed to purchase $850m-$1.1b in 2036-2044 sector
  • 11:30am: U.S. to sell $25b 1Y bills; U.S. to sell $25b 4W bills
  • 1:00pm: U.S. to sell $30b 2Y notes

Central Bank Speakers

  • 8:05am: Fed’s Plosser speaks in New York
  • 2:00pm: Fed’s Dudley speaks in New York
  • 6:30pm: Fed’s Williams speaks in Stanford, Calif.

Market Wrap

  • S&P 500 futures down 0.1% to 1951.7
  • Stoxx 600 little changed at 346.4
  • US 10Yr yield down 2bps to 2.61%
  • German 10Yr yield little changed at 1.33%
  • MSCI Asia Pacific up 0.1% to 144.9
  • Gold spot little changed at $1316.7/oz

EUROPE

  • 11 of 19 Stoxx 600 secors rise, led by chemicals and oil & gas; miners underperform
  • 42% of Stoxx 600 members gain, 55% decline
    Eurostoxx 50 +0.2%, FTSE 100 -0.1%, CAC 40 +0.2%, DAX +0.1%,  IBEX little changed, FTSEMIB -0.1%, SMI +0.3%
  • German June IFO business climate index 109.7; est. 110.3

ASIA

  • Asian stocks rise with Indian, Korean shares outperforming
  • MSCI Asia Pacific up 0.1% to 144.9
  • Nikkei 225 little changed, Hang Seng up 0.3%, Kospi up 1%, Shanghai Composite up 0.5%, ASX down 0.4%, Sensex up 1.4%
  • 8 out of 10 sectors rise led by utilities; energy stocks underperform

ASIAN HEADLINES

JGBs traded 5 ticks higher at 145.43 despite underperformance in the long-end, as 30yr yields rose to their highest level since January 7th. The Nikkei 225 (+0.05%) recovered from early weakness with JPY as a main driver for price movement. Shanghai Comp (+0.47%) led by consumer shares, while the Hang Seng (+0.33%) bounced back from its biggest loss in three months yesterday.

EUROPE/UK

The Bank of England’s appearance in front of the Treasury Select Committee focused closely on the level of spare capacity in the UK economy, with Carney, Bean and Miles all highlighting that slack in the UK must still be exhausted before any move on rates can occur. As such, UK rates fell across the curve as Carney failed to maintain his hawkish turn at Mansion House a fortnight ago. Also of note. Today has seen the DMO 30yr syndication with demand currently standing at GBP 10bln.

Worse-than-expected German IFO data (109.7 vs. Exp. 110.3) failed to dent the EUR, with a short-squeeze in EUR/USD erasing the modest Asia-Pacific losses.

Prelim Barclays month end extensions show Pan-Euro Agg at +0.09y (Prev. +0.04y)

US HEADLINES

Newsflow remains light out of the US with participants looking ahead to US consumer confidence and the first Fed official comments since last week’s decision and blackout period with Plosser (Voter, Hawk) and Williams (Voter, Dove) due to speak.

Prelim Barclays month end extensions show US Treasury at +0.07y (Prev. +0.12y)

EQUITIES

European equity markets have paused for breath (Euro Stoxx 50 -0.1%), with core European indices trading flat ahead of the US open, with eyes turning to the looming Fed speakers, with both Williams and Plosser due on the docket. This comes despite underperformance in the FTSE MIB (-0.7%) as Italian banks remain under pressure. Further cross-border M&A based on tax benefits has lifted specific stocks today, with Switzerland’s Syngenta the latest to gain on reports that Monsanto had tabled a USD 40bln bid for the Co. two months ago.

Concerns are mounting in the Middle-East after Dubai’s DFM General index fell over 8% which is its biggest decline since October 2008. Yesterday marked the start of a bear market (20% decline from peak) after 19% year to date gains. Dubai is continuing the downtrend which has been in place since the beginning of May with the recent catalyst yesterday being property company Arabtec falling nearly 10% after it cut a large number of staff, this in turn weighed on Emmar properties which accounts for nearly 25% of the main index. This also follows the UAE central bank earlier in the month saying there were signs the property market is overheating.

FX

GBP fell aggressively following the change in direction from Carney, which saw GBP/USD break below 1.7000 and EUR/GBP break through 0.8000 on the upside. USD sits lower ahead of Consumer Confidence and New Home Sales data later today.  Elsewhere, after failing to break the 0.9450 option barrier yesterday AUD/USD sees a continued downward trend with stops taken out at 0.9400.

COMMODITIES

Energy markets trade softer, with WTI and Brent crude futures retreating from nine month highs after US Secretary of State Kerry’s push for a new government in Iraq to include sectarian factions, in order to present a unified front against the ISIS militants. Elsewhere in commodities, precious metals have been lifted by a break in USD 21.00/oz to March highs in silver, as the softer USD and poorer-than-expected IFO figures in Germany lifted the complex.

* * *

DB's Jim Reid, recovering from his biking extravaganza, completes the overnight recap

Following the excitement of the ECB and the Fed meetings earlier this month, we’ve quickly returned to a familiar pattern of low volatility and even lower volumes. Though the S&P 500 notionally broke its six-day winning streak, it finished virtually unchanged at -0.01% after trading in a narrow 4 point range and seeing the second lowest volume for a Monday this year. In saying that, there have been some interesting underlying themes such as the recent nine month highs reached in Brent and WTI crude. Markets have been left wondering whether this could derail the EM carry theme, particularly amongst the oil-exposed economies, and whether it will add to the recent uptick in US inflation. Indeed the IDR, ZAR, INR and TRY have been the worst performing currencies over the past month according to Bloomberg data. These currencies got a small reprieve yesterday when crude fell by the most in about a month (WTI -1.02%, Brent -0.6%) , helped along by reports that the Iraqi military had recaptured some areas bordering Syria and Jordan. There was very little negative reaction to reports that ISIS had captured the Baiji oil refinery, the largest refinery in Iraq. The refinery’s production is entirely slated for domestic consumption across Northern Iraq according to France24, and though there are widespread reports of domestic oil shortages in Iraq, for now global markets have taken comfort from the fact that the supply of oil from the country’s south is largely intact. Brent (-0.4%) and WTI (-0.5%) have extended their declines this morning.

The global PMIs were a little mixed yesterday with the European readings taking some of the gloss off yesterday’s better than expected Chinese PMIs. The US manufacturing PMI was better than expected at 57.5 (vs 56.0), the highest reading since May 2010. Outside of the PMIs, the only other data to note was US existing home sales which were up 4.9% to 4.89 million SAAR (versus expectations of +1.9% and 4.74m). DB’s economics team notes that this was the highest level since October of last year (5.13 million). The headline gain was driven by single-family sales (+5.7% vs. +0.7%), while condo sales were unchanged in the month (vs. +7.3% previously). UST yields hit a low of 2.588% shortly before the home sales data but closed +2bp on the day at 2.626%.

There’s not a lot on the US data docket this week but one of the more interesting data points could be Thursday’s May personal consumption expenditures report. The PCE core and PCE deflator indices were up 1.4% yoy and 1.6% yoy in April, respectively. Both indices have registered gains for three straight months and are showing signs of acceleration after marginal gains in Q1. In an opinion piece yesterday, the WSJ’s Jon Hilsenrath wrote that this could test Yellen’s view that inflation is “moving back gradually over time toward our 2% objective”. The article argues that if the March trend holds, the PCE index might already be at the Fed’s objective and therefore would be “begging all kinds of questions” in terms of Fed policy. On a separate but related theme, the FT writes that central banks are planning to cut their exposure to longer-term bonds to protect against a shift in Fed policy. The article notes that “the majority of respondents in a survey of reserve managers who control assets worth $6.7tn, or more than half of central banks’ total reserves, said they were likely to adjust their portfolios in preparation of tighter monetary policy”.

It’s been a mixed session overnight even though most bourses are up on the day following a strong showing Chinese stocks. A number of street economists have increased their GDP growth forecasts for China following yesterday’s PMI and this is perhaps buoying Chinese stocks today (HSCEI +0.4%). Chinese copper futures are trading up (+0.1%) and are poised to close stronger for the sixth time in the last 7 sessions. More broadly, metals prices appear to be recovering, and Chinese merchants are reportedly restocking following recent investigations into inappropriate inventory financing at one or more Chinese ports.

Elsewhere in China, the province of Guangdong became the first local government to issue bonds directly in its own name. This comes after the State Council gave tentative approval to 10 regions last month to directly issue bonds as part of its financial market reforms. The WSJ says that that the Guangdong Province sold five-year bonds at 3.84% which is lower than the 3.99% on a sale of bonds by the finance ministry earlier this month that were issued on behalf of local governments. The WSJ suggests that demand for the bonds may have been elevated by local banks who were keen to buy the debt so they keep receiving the large pools of deposits from the local government.

Looking at the day ahead, there is more US housing data today in the form of Case-shiller home prices for April and May new home sales. The US consumer confidence index is also released today. In Europe we have the German IFO survey. Governor Carney presents the BoE’s inflation report to parliament’s Treasury Committee. He will be joined by fellow MPC members including Charles Bean, David Miles and Ian McCafferty. Philadelphia Fed President Plosser speaks about the economic outlook and monetary policy at the Economic Club of New York – we can expect a relatively hawkish speech.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 06/24/2014 - 07:14 | 4888594 MeMongo
MeMongo's picture

Mongo thinks Dubai may need to sell some of those exotic police vehicles they own! 

Tue, 06/24/2014 - 07:30 | 4888616 slaughterer
slaughterer's picture

All that Middle Eastern money will come pouring into the US equity markets. 

Tue, 06/24/2014 - 07:33 | 4888618 NoDebt
NoDebt's picture

That's the spirit!  Now go buy some stawks.

Tue, 06/24/2014 - 08:18 | 4888683 Save_America1st
Save_America1st's picture

Ag and Au blast off outta the gate early...silver finally breaks through nicely on 21 but as always (and especially on Tuesdays), the monkeys are set loose to hammer that paper back down right at 8am.  Wash, rinse, repeat

Tue, 06/24/2014 - 07:34 | 4888619 stocktivity
stocktivity's picture

It's all Bullshit!!!  and besides....it's Tuesday

Tue, 06/24/2014 - 07:15 | 4888595 booboo
booboo's picture

That is more than just a few plates the clowns need to keep spinning while walking the tight rope across the gator pit.

Tue, 06/24/2014 - 07:23 | 4888602 ENTP
ENTP's picture

There are only 3 plates they need to keep spinning:

1.  Print Money

2.  Reformulate economic data calcs so the data matches what they wish was occurring.

3.  Jawbone so the rhetoric matches what they wish was occuring.

Tue, 06/24/2014 - 08:18 | 4888684 Eyeroller
Eyeroller's picture

4.  Prevent oil from rising.

 

FED has no control of events in Iraq and Ukraine.

Tue, 06/24/2014 - 07:15 | 4888596 kaiserhoff
kaiserhoff's picture

takes down the best laid plans of central-planners and men?

How about central planning mousy men?

Tue, 06/24/2014 - 07:17 | 4888599 fonzannoon
fonzannoon's picture

Is there an address where we can send Jim Reid a congratulations card on his biking extravaganza?

It looks like if China blows up and takes Japan with it we may see $22 silver.

Tue, 06/24/2014 - 07:24 | 4888600 Mike in GA
Mike in GA's picture

Using the stick-constructed "dome" analogy from the illustration in Gail's article below about the "Economy is a Network", Dubai is as one 'stick' in the dome.  Or, stated differently, Dubai could be the flapping of the butterfly's wings today that leads to the hurricane of next week.

The price of oil remaining flat for several years now, as she also mentioned, may be a contributing factor in Dubai's market fluctuation.  God knows there's enough geopolitical tension to keep an eye on over there.

Tue, 06/24/2014 - 07:24 | 4888611 AUD
AUD's picture

Maybe, but this article says EU peripheral bond spreads have narrowed & Asian stocks are up, indicating that Asian bond spreads have also narrowed.

So maybe not.

Tue, 06/24/2014 - 07:23 | 4888607 youngman
youngman's picture

Something fishy in Dubai..no kidding..the whole thing is a facade....nothing there before the oil money...build it and they will come...what a development concept...everything had to be the biggest...most expensive...different...and all for the 1% ers.....who needs a home on a palm tree man made island????

Tue, 06/24/2014 - 07:29 | 4888614 Jlasoon
Jlasoon's picture

Obviously those same people who need an indoor ski resort at a shopping mall. Nothing like taking to the slopes and finishing off the experience with some shopping at Gucci for a $1200 scarf.  

Tue, 06/24/2014 - 07:53 | 4888632 max2205
max2205's picture

What the Dubia market cap?

Tue, 06/24/2014 - 08:17 | 4888679 RadioactiveRant
RadioactiveRant's picture

US$75bn

Tue, 06/24/2014 - 07:23 | 4888609 buzzsaw99
buzzsaw99's picture

the relentless push for the squid's carbon tax scheme continues

Tue, 06/24/2014 - 07:26 | 4888612 Callz d Ballz
Callz d Ballz's picture

Just the head fake we need going into Tuesday, BTFATH!

Tue, 06/24/2014 - 07:27 | 4888613 pachanguero
pachanguero's picture

The bubble here in thailand is breathtaking........20,000 condos coming online all at once.  Nothing to see here....move along

Tue, 06/24/2014 - 08:12 | 4888667 orangegeek
orangegeek's picture

S&P500 daily almost made it 7 days in a row

 

http://bullandbearmash.com/chart/sp500-barely-moves-volume-signs-higher-...

 

Low POMO day - time for pullback?  Quarter  end too - everyone wants to make bonus.  Remember the days of revenue and profit discussions?  All those years ago?

Tue, 06/24/2014 - 08:21 | 4888689 RadioactiveRant
RadioactiveRant's picture

Baltic Dry is now just 28 points off a 52 week low, having fallen 61% YTD. All those Chinese warehouses must be filling themselves up.

Tue, 06/24/2014 - 09:15 | 4888831 db51
db51's picture

Dow 20,000 by July 4th.,

Do NOT follow this link or you will be banned from the site!