This page has been archived and commenting is disabled.

Futures Tread Water As Ukraine Tries To Steal The Jackson Hole Scene

Tyler Durden's picture




 

While today's key events were supposed to be the Jackson speeches first by Janet Yellen at 10:00am Eastern and then by Mario Draghi at 2:30 pm, Ukraine quickly managed to steal the spotlight yet again when moments after the first Russian humanitarian aid convoys entered Ukraine allegedly without permission, Kiev first accused Russia of staging a direct invasion, even if moments later it changed its tune and said it had allowed the convoy in to "avoid provocations." In other words, your daily dose of Ukraine disinformation, which initially managed to push futures down some 0.3% before futs regained virtually all losses on the subsequent clarifications. Expect much more conflicting, confusing and very provocative headlines out of Kiev as the local government and the CIA try to get their story straight.

In terms of overnight markets, Asian equities and credits are mostly firmer ahead of Jackson Hole. The Shanghai Composite ad HSCEI indices are both around 0.2% as they recover somewhat from yesterday’s disappointing flash manufacturing PMI. Chinese stocks are poised to close higher for the 6th consecutive week in what would be its longest streak since March 2012. Elsewhere in Asia the Nikkei is flat on the day while the Hang Seng and the KOSPI are +0.4% and +0.5%, respectively. Turning to credit, Asian IG cash continues to grind tighter amid very light supply. Key benchmarks are about 1bps tighter as we type. The UST 10-year yields are a touch firmer at 2.40% while the Dollar index is unchanged.

After initially opening flat, European equities drifted slightly lower ahead of the US crossover on position squaring ahead of Fed Chair Yellen’s appearance at Jackson Hole. The financials sector is slightly supporting the indices as European bank stocks look forward to ECB’s Draghi speech in Wyoming, expected to stress the broad divergence in monetary policy between the US and the Eurozone. Vodafone (+1.1%) shares traded in minor positive territory this morning after AT&T bid chatter was recycled in UK press. US stock futures trade relatively flat ahead of the open, with record highs still well within reach. In pre-market news, Apple (AAPL) are reportedly suffering from supply chain issues, with the drive for a thinner iPhone model is causing backlight issues, with the supply chain source remaining unsure on whether this could delay release.

There is nothing of note on today's US econ release docket: it will be a very quiet day for data which sets up the spotlight nicely for Yellen and friends at Jackson Hole.

Bulletin headline summary from RanSquawk and Bloomberg:

  • After a flat open, Bund futures broke above yesterday’s highs of 150.40 as markets remain wary over Russia’s aid convoy making its way to Luhansk – reportedly escorted by a small group of pro-Russian rebels without Kiev’s approval
  • European equity markets trade slightly lower on position squaring ahead of various central bank speeches in Jackson Hole, Wyoming later today
  • Speeches from Fed Chair Yellen (1500BST/0900CDT) and ECB Governor Draghi (1930BST/1330CDT) are expected to stress the policy divergence between the Federal Reserve and the ECB

FIXED INCOME

European fixed income futures opened flat amid particularly light newsflow and thin volumes. Nonetheless, Bund futures broke above yesterday’s highs as Russia warned that any disruption to the aid convoy heading toward Luhansk, eastern Ukraine would not be tolerated. Still, volumes below 100k in Sep-14 Bund futures kept price action relatively erratic. Despite this, witness reports suggest the aid convoy is being escorted by a small number of pro-Russian rebels, without Ukraine’s consent is keeping markets wary of the developments. Core fixed income markets remain somewhat supported by the particularly chunky month-end extensions, particularly in the US:

Prelim Barclays month end extension for Pan-Euro Agg at +0.03y (Prev. 0.12yrs, 12m average +0.03yrs)
Prelim Barclays month end extension for Sterling Agg Tsy at +0.08y
Prelim Barclays month end extension for US Treasuries +0.12yrs (Prev. 0.08yrs, 12m average +0.09yrs)

EQUITIES

After initially opening flat, European equities drifted slightly lower ahead of the US crossover on position squaring ahead of Fed Chair Yellen’s appearance at Jackson Hole. The financials sector is slightly supporting the indices as European bank stocks look forward to ECB’s Draghi speech in Wyoming, expected to stress the broad divergence in monetary policy between the US and the Eurozone. Vodafone (+1.1%) shares traded in minor positive territory this morning after AT&T bid chatter was recycled in UK press. US stock futures trade relatively flat ahead of the open, with record highs still well within reach. In pre-market news, Apple (AAPL) are reportedly suffering from supply chain issues, with the drive for a thinner iPhone model is causing backlight issues, with the supply chain source remaining unsure on whether this could delay release.

FX

The USD continued to retreat from 11-month highs this morning, allowing EUR/USD and GBP/USD to pull back toward 1.3300 and 1.6600 respectively. Elsewhere, USD/JPY trades slightly lower as the pair continues to retreat way from 104.00 after a failure to break that level yesterday. Looking ahead, Canadian CPI will likely dictate the USD/CAD range, with a slew of option expiries at 1.0920-25 (280mln) and 1.1000 (1.23bln) at the 10am (1500BST) NY cut particularly close to market.

COMMODITIES

WTI and Brent crude futures fell ahead of the NYMEX open, with WTI futures prices retreating to the mid-point of yesterday’s range, on track to mark a sharp weekly loss of over USD 1.50/bbl. Spot gold still sits below the 200DMA at USD 1,284.49, however has benefited this morning from renewed risk surrounding eastern Ukraine and a moderately softer USD.

* * *

DB's Jim Reid, or rather his team while he is on vacation, concludes the rest of the overnight events

The Jackson Hole symposium is the main event for today. If that wasn’t enough we also have an all star line up of central bank governors this year. All eyes will clearly be on the Yellen’s key note address but this time round we’ll also hear from Draghi at lunchtime, Kuroda from the Bank of Japan, and Broadbent from the Bank of England. It was 2011 when we last had both the Fed Chair and ECB President at Jackson Lake Lodge so today’s line up is certainly eye-catching especially given the policy divergence amongst the themselves. The theme of this year's symposium is "Re-Evaluating Labour Market Dynamics". Yellen will kick things off with her opening remarks at 8.30am local time (3pm UKT) followed by a luncheon address from Draghi at 12.30pm (7.30pm UKT). Broadbent, Kuroda and Tombini are panellists at a panel discussion titled ‚Labour Markets and Monetary Policy? the next day which could be an interesting one given Carney’s recent comments on wages.

So what can we expect from Yellen? Our US economists expect the Fed Chair to provide us with an updated assessment on the infamous ‘Yellen dashboard’ in evaluating the ongoing labour market slack and how they have yet to normalise relative to 2002-2007 levels. Some of these alternative measures she monitors include duration of unemployment, quit rate in JOLTS data, labour force participation etc. Any sound bite that touches on the debate of cyclical versus structural drivers of labour force participation will also be closely followed. Unlike some of the previous Jackson Hole symposiums, this is likely not one that will serve as a precursor of any monetary policy changes but the tone of Yellen's speech may still have a market impact and set the mood for busier times ahead in September. Given markets are seemingly expecting nothing but another dovish display from Yellen the risk is perhaps skewed to the other side.

In terms of overnight markets, Asian equities and credits are mostly firmer ahead of Jackson Hole. The Shanghai Composite ad HSCEI indices are both around 0.2% as they recover somewhat from yesterday’s disappointing flash manufacturing PMI. Chinese stocks are poised to close higher for the 6th consecutive week in what would be its longest streak since March 2012. Elsewhere in Asia the Nikkei is flat on the day while the Hang Seng and the KOSPI are +0.4% and +0.5%, respectively. Turning to credit, Asian IG cash continues to grind tighter amid very light supply. Key benchmarks are about 1bps tighter as we type. The UST 10-year yields are a touch firmer at 2.40% while the Dollar index is unchanged.

Staying on macro matters we thought global supply chain manager Li & Fung’s latest results yesterday offered some interesting anecdotes. The company’s performance for the first 6 months was hampered by ongoing macroeconomic weakness, geopolitical and weather events in its key destination markets (US and Europe). Price discounting remains a theme in US retail even beyond the end of June. The company also noted a reduction of foreign tourist flow by Russian tourists into Europe which is affecting retail markets there. This fits consistently well with some of the ECB’s geopolitical concerns outlined at its previous policy meeting.

Back to yesterday markets had a positive day as strong US data outweighed the mixed European PMI reads. The Eurozone Composite PMI disappointed, falling to 52.8 vs expectation of 53.4. As our European economists noted yesterday, the disappointment was driven by the periphery as the combined Italian, Spanish and Irish index fell by 1.8 points compared to a fall on the combined German-French composite PMI index of 0.1 points (implied consensus -0.4). Other then this regional divergence, there was a continued divergence between the Eurozone services and manufacturing read as the former came in just below expectation (53.5 vs 53.7) whilst the latter came in at 50.8 vs expectation of 51.3. In terms of what these reads mean for Europe, according to our economists these reads are still consistent with between +0.3% and +0.4% qoq GDP growth in Q3 GDP.

Across the Atlantic, it was a strong day for US data with every data point of note beating expectation. The initial jobless claims came in lower than expected at 298k (vs 303k consensus). On the activity side the Markit manufacturing PMI came in at an impressive 58 (vs 55.8 consensus), the highest read in the indexes 3 year history, the Philly Fed reached its highest level in over 3 and a half years at 28, and finally the string of good US housing data continued with July existing home sales coming in at +2.4% MoM against expectations that it would slip -0.5%.

Despite the mixed European PMI data stocks in Europe were up with the Stoxx 600 up +0.66% led by strong gains on the FTSE MIB (+2.06%), IBEX 35 (+1.30%) and CAC (+1.23%). Credit also performed yesterday with iBoxx Main and Xover -1bp and -3bps tighter. Yesterday’s peripheral outperformance even given the PMI’s suggests the moves were largely driven by rising expectations for European QE activism which probably adds more importance (if any were needed) to Draghi’s luncheon speech later today. Over in the US, the stronger data were clearly helpful which saw the S&P 500 (+0.29%) close at a new all time high of 1992. In US credit, the CDX IG and HY moved -2bp and -6bps tighter, respectively.

Whilst on Credit it’s worth noting that weekly US HY fund flows turned positive for the first time in 7 weeks. According to EPFR data the asset class received inflows of US$2.7bn during the week that ended 20 August vs an outflow of US$781m in the previous week and US$8.2bn the week before that. European HY outflows have also slowed down with the latest weekly outflows coming in at US$193m versus US$654m in the previous week and US$934m the week prior to that.

Moving on to geopolitical updates, US strikes have continued in Iraq in support of Kurdish and Iraqi forces fighting IS near the city of Mosul (BBC). In Ukraine, guards at the country’s border have begun to inspect the Russian aid convoy’s trucks. Ukrainian President yesterday also announced that he may dissolve parliament as early as Sunday to set up parliamentary elections in late October (Reuters). Focus this weekend will be his meeting with Merkel at home followed by the Russia-Ukraine summit in Minsk next Tuesday in an effort to de-escalate the conflict.

Looking ahead to today it will be a very quiet day for data which sets up the spotlight nicely for Yellen and friends at Jackson Hole.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 08/22/2014 - 07:20 | 5128953 y3maxx
y3maxx's picture

...Overnight it looks like America is dropping Ukraine and going Warp Speed against Isis, led by Chuck Hagel yesterday.

Fri, 08/22/2014 - 07:23 | 5128961 Quinvarius
Quinvarius's picture

If only we could find some way to stop ISIL from getting funding, training, and weapons.  We may never know how they suddenly got so professional after we started funding, training, and arming Syrian Rebels.  It is like they came out of no where as soon as we started doing that.

Meanwhile, Obama is still in rehab for his crack relapse.

Fri, 08/22/2014 - 07:28 | 5128971 negative rates
negative rates's picture

Doomed, you are all doomed I say!

Fri, 08/22/2014 - 07:36 | 5128981 GetZeeGold
GetZeeGold's picture

 

 

If only we could find some way to stop ISIL from getting funding

 

ISIS, ISIL......Syrian rebels....et al.

 

It's freakin Al-Qaeda!

 

So stop with all the cute names....and just call it what it is.

 

Fri, 08/22/2014 - 07:49 | 5129017 Latina Lover
Latina Lover's picture

The Ukies ate too many of Nuland/Nudelmans psychadelic cookies and are now suffering from flashbacks.

Fri, 08/22/2014 - 08:05 | 5129070 kaiserhoff
kaiserhoff's picture

WTF is with these head lines?  Yaz, I'm sure everyone in Ukraine is obsessed with Yellen and Jackson Hole, just like the hyper-ventilating Jew Yorkers.

The sewer gas must be getting worse up there.

Fri, 08/22/2014 - 09:18 | 5129303 SquadronVBF94
SquadronVBF94's picture

What a load.

Fri, 08/22/2014 - 09:25 | 5129319 Save_America1st
Save_America1st's picture

Keep an eye on silver today.  They've pretty much had it on a lock down around 19.40 to 19.50 this week. 

I think they're waiting for Ol' Yellen to flap her face hole at Jackson Hole so they have any kind of excuse to monkey hammer the hell outta silver.

could be a sweet BTFD opportunity if they shove the paper silver price down to 19/oz.  I know I'd love it if they did. 

Then expect a sharp rebound back up through 19.50 again. 

I just wouldn't put it past them to do that is all I'm saying...just a prediction.  Keep some dry powder at the ready and be ready to pull the trigger on a nicely manipulated dip today. 

Stack on, Stackers!!!

Fri, 08/22/2014 - 09:26 | 5129328 fonzannoon
fonzannoon's picture

if she flaps her face about raising rates you may want to hold out for $12

Fri, 08/22/2014 - 09:34 | 5129359 Save_America1st
Save_America1st's picture

hellz yeah!  I hope she does.  Hell, if she sneezes they'll knock .25 out of silver just for the fun of it! lol

So yeah, as a caveat and to your point, I would not recommend anyone blow their wad at any dip today or ever.  Go in a little at a time and wait for another dip to stack a little more. 

I do, however, think it's extremely difficult for them to push below that 18.70 area though.  We've seen it a few times and there's really good resistance there for some reason. 

Maybe they know that anything much lower will spark another huge supply problem and will drive premiums up and they don't want to start a panic.  I think they like to keep silver on the "low down" so that the sheeple and the "hedgies" don't all start rushing into it. 

But one day that stampede is definitely going to happen.  And we want to make sure our stacks are high and secure (at the bottom of the lake) when it does happen.  I don't wanna be caught up in that.  I just wanna watch with nice big buttery bucket 'O-popcorn.

Fri, 08/22/2014 - 08:22 | 5129111 Callz d Ballz
Callz d Ballz's picture

They're so JV, everyone knows you should use a machete.

Fri, 08/22/2014 - 08:33 | 5129151 max2205
max2205's picture

If you like your J Hole.....

Fri, 08/22/2014 - 07:25 | 5128967 Sudden Debt
Sudden Debt's picture

Obama really needs a enemy he can attack real fast.

It's almost like they're desperate to find something quickly...

and if you look at how the european economy is simply grinding to a halt it's like something economicly is about to happen also.

Industrial output is now down 17% so far for august and that's freaking out a lot of people!

Fri, 08/22/2014 - 07:30 | 5128977 Quinvarius
Quinvarius's picture

It took an injection of 200 billion into the money supply last month to stop the stock market from cratering.  Can they do that every month?

Fri, 08/22/2014 - 08:34 | 5129156 max2205
max2205's picture

They can do that every day or even ever hour

Fri, 08/22/2014 - 07:35 | 5128987 clade7
clade7's picture

With so many enemies to choose from this is a tough one!

 

"Oh Hell, lets just go after Whitey like normal, attack on a Monday when they are all at work and we should have this wrapped for a 12pm tee time"

Whaddaya Say?

Fri, 08/22/2014 - 07:30 | 5128973 negative rates
negative rates's picture

Give us the latest up chuck on that story, can you?

 

How much wood could a woodchuck chuck, if a woodchuck could chuck wood??

Fri, 08/22/2014 - 07:30 | 5128978 Bossman1967
Bossman1967's picture

Thats because Putin is smart and didn't give the politicians the excuse of blaming our crash on him so ISIL will but of a much different religious war and we have turned our back on God and can only hope that those of us that haven't will be protected from the caliphate

Fri, 08/22/2014 - 07:19 | 5128955 GetZeeGold
GetZeeGold's picture

 

 

but this time round we’ll also hear from Draghi at lunchtime

 

Pretty cocky doing that at lunch......hope they have a good supply of motion sickness bags.

Fri, 08/22/2014 - 07:19 | 5128957 Squid-puppets a...
Squid-puppets a-go-go's picture

Ukrain: "help! were being invaded by trucks of blankets and orange juice!"

Fri, 08/22/2014 - 07:49 | 5128964 JustObserving
JustObserving's picture

If not for lies, Yellen would have nothing to say in Jackson Hole. A precis of her speech - Economy is great, unemployment is improving, housing is recovering and so we must keep interest rates low forever (lest the stock market falls which will be left unsaid).

Fri, 08/22/2014 - 07:40 | 5128965 AdvancingTime
AdvancingTime's picture

While we have our eyes focused on Ukraine, ISIS, and Jackson Hole things are getting ugly in Pakistan. Many Americans do not understand why we continue to give and pour money into Pakistan. This could add to our woes and become a major problem going forward.

The Islamic Republic of Pakistan is a sovereign country in South Asia with a population of over 180 million people. What makes Pakistan an important player in it's neighborhood is that it has nuclear weapons and is politically unstable. More on the subject of why Pakistan is so important in the article below.

http://brucewilds.blogspot.com/2013/08/pakistan-why-it-is-important.html

Pakistan is one of those problems that may be "unfixable" but could get worse!

Fri, 08/22/2014 - 07:44 | 5128999 craus
craus's picture

Advancing I told you to stop peddling your trash around here.

Fri, 08/22/2014 - 07:58 | 5129043 AdvancingTime
AdvancingTime's picture

Please forgive me for trying to call attention to a problem that most people are ignoring. Pakistan has been a problem for so long most people have put it on the back burner. If the government falls fear about who controls its weapons is real.

Fri, 08/22/2014 - 08:22 | 5129110 negative rates
negative rates's picture

Just Bite The Fucking Dust and admit you are powerless to prevent their actions.

Fri, 08/22/2014 - 07:39 | 5128995 buzzsaw99
buzzsaw99's picture

it's a real nowhere market

trading in the pools that are dark lit

isn't it a bit like you and me?

Fri, 08/22/2014 - 07:43 | 5129000 Dungholio
Dungholio's picture

Relax everyone, futures will be green again shortly!!!

Fri, 08/22/2014 - 07:54 | 5129014 craus
craus's picture

I hope the boy call wolf or Ukraine will spoil Yellen's routine. That is to continue killing gold and treasuries today. While bringing useless futures up.

Fri, 08/22/2014 - 07:49 | 5129018 Bill of Rights
Bill of Rights's picture

The official White House caption reads:

President Barack Obama talks with National Security Advisor Susan E. Rice following foreign leader phone calls, from Chilmark, Mass., August 11, 2014. (Official White House Photo by Pete Souza) 

Seriously?

The president appears lost in some distraction. Maybe his last golf game.

Mr. Obama appears to be almost in pain as Rice tries to lure him back into the role he was elected to fill.

Or maybe Obama's just miffed that those pesky foreign leaders kept him from a photo-op burger date with another single mom.

 

http://2.bp.blogspot.com/-RTJO-YEYIrQ/U_ZV6RIb86I/AAAAAAAAItc/E0NFQP0Dag...

Fri, 08/22/2014 - 07:51 | 5129025 Dungholio
Dungholio's picture

"Mr. Obama appears to be almost in pain as Rice tries to lure him back into the role he was elected erected to fill."  < fixed

Fri, 08/22/2014 - 09:26 | 5129326 Xandrino
Xandrino's picture

Rice: "You can read can't you?" 

Buttfuck Orala: "Bogey at the 18th" 

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