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Futures Levitate On "Republican Rally"; Crude Rout Continues
While hardly a surprise, the spin for the latest round of overnight BOJ USDJPY-buying exuberance, which sent the pair higher by another 100 pips to a fresh 7 year high of 114.500 and just over 500 pips from the Albert Edwards "line in the sand" 120 and pushed US equity futures higher with it, has been the Republican sweep in the midterm elections which not only solidified GOP control of the House but also gave Republicans outright control of the Senate.
As noted before, Republicans took control of the Senate after gaining 7 senate seats and now control both the Senate and the House of Representatives. This result has been well-received by markets, given that it will help open the gateway to reforms that could not previously have been made as analysts suggest that President Obama will now attempt to work with the GOP in the build-up to the 2016 election. Thus global equity futures have surged higher, with the USD-index benefiting and USTs being dragged lower.
The futures extravaganza has taken place even as Brent dropped for the 5th day, falling to $81.63 the lowest since Oct. 2010, with WTI down some 37 cents to $76.81 a level where US shale drillers are no longer profitable...
... amid growing sentiment OPEC will maintain output target at Nov. 27 meeting even as the oil Basket tumbles past $80.
As a result, European equities trade in the green after opening higher by ~1% following the Republicans winning the Senate & House at the US mid-term elections which has also boost the USD-index which is currently up in excess of 0.5%. More specifically, overall the Republican win has helped equity markets and in company news Marks & Spencer (+8.4%) is the star out performer after their earnings report was not as bad as some had feared. Materials and energy are the weakest sector performers following the losses in precious metals and oil. The strength in equities has subsequently brought a bout of softness to fixed income products, with the Bundesbank’s Bobl auction which drew a higher b/c than previous failing to provide any further price action. Of note, European markets will be looking ahead to more supply due to come from France and Spain tomorrow.
Overnight in Asia markets are trading softer, not helped by a lower services PMI print in China (52.9 versus 53.3 last month). As we type bourses in Hong Kong and China are -0.4%, -0.2% respectively, dragged lower by energy stocks. In Japan the Nikkei has taken something of a breather following the rally since Friday and is currently broadly unchanged whilst the Yen is -0.3% versus the Dollar. Kuroda has made his first public appearance since Friday’s stimulus action and has helped to erase earlier losses in the day with the key takeaways from his speech being his pledge to stamp out the ‘deflationary mindset’ within the nation and that the BoJ stands ready to ease monetary policy again should there be any further risks to the inflation target.
On today's US docket we have ISM non-manufacturing, mortgage applications, ADP employment change, Markit U.S. composite PMI, Markit U.S. services PMI due later.
Bulletin Headline Summary from RanSquawk and Bloomberg
- US mid-term elections dictate the state-of-play with markets welcoming the Republican victory with open arms and sending both equities and the USD-index higher.
- The stronger USD has subsequently lifted USD/JPY to Dec 2007 highs, while pushing spot gold to its lowest levels since April 2010 and providing further downside for the much beleaguered energy complex.
- Looking ahead, attention turns towards ADP employment change due at 1315GMT/0715CST, with US services PMI, ISM non-manf. and DoE inventories to follow thereafter. With Kocherlakota, Lacker and Rosengren all due on the speaker slate.
- Treasuries lower as stock-index futures gain following Republican victories in U.S. midterm elections; market focus on ADP report for first look at Oct. employment, ECB tomorrow, payrolls Friday.
- Republicans roared back in the midterm elections on Tuesday, capturing control of the Senate from Democrats, winning crucial governor races and solidifying their majority in the U.S. House
- GOP won seven seats, with more possible; Alaska still counting votes, Louisiana headed for runoff on Dec. 6. Scott Walker in Wisconsin and Rick Scott in Florida and Bruce Rauner in Illinois prevailed in gubernatorial races; GOP poised to hold sway in 36 statehouses
- Republicans capitalized on voter anger over Obama’s handling of the economy; 7 out of ten rated economic conditions poor, preliminary exit polls showed
- Republicans will try to force a politically weakened Obama to accept changes to his health-care law, back off on tough environmental rules and nominate judges they endorse.
- Pimco had record redemptions from its biggest mutual fund in the first full month after the surprise departure of former manager Bill Gross, with clients pulling $27.5b in October
- The ruble weakened to a record as Russia’s central bank moved a step closer to allowing the currency to trade freely in an effort to shake out speculators
- Sweden’s central bank is ready to keep its main rate at zero for longer than its latest forecast suggests in an effort to fight deflation
- Sovereign yields mixed. Asian stocks mixed, Nikkei +0.4%, Shanghai -0.5%. European stocks, U.S. equity-index futures gain. Brent crude lower, copper declines, gold slides 2.2%
US Event Calendar
- 7:00am: MBA Mortgage Applications, Oct. 31 (prior -6.6%)
- 8:15am: ADP Employment Change, Oct., est. 214k (prior 213k)
- 9:45am: Markit US Services PMI, Oct. final (prior 57.3)
- Markit US Composite PMI, Oct. final, est. 58 (prior 57.4)
- 10:00am: ISM Non-Manufacturing Composite, Oct., est. 58 (prior 58.6)
Central Planners
- 9:15am: Fed’s Kocherlakota speaks in Virginia, Minn.
- 9:30am: Fed’s Lacker speaks in Washington
- 10:00am: Fed’s Rosengren speaks in Lima, Peru
- 6:45pm Former Fed Chairman Bernanke speaks in Denver
- 6:50pm: Bank of Japan issues Oct. 6-7 meeting minutes
FX
USD has strengthened as Republicans are seen as more market friendly, although according to some they are perceived to be against the Fed and will try and persuade Yellen to raise rates quicker (needless to say "some" are wrong.) Furthermore, a continuation of weaker oil prices has also weighed on CAD which is at its lowest levels since July 2009 against USD as lower oil prices could pose some threat to Canadian GDP. Additionally, JPY has continued to weaken with USD/JPY at its highest levels since Dec 2007 continuing its trend set on Friday's expansion in QQE and Kuroda overnight saying "there is no limit to future policy options." Well, there is: once the BOJ runs out of securities to monetize it's game over.
Elsewhere, GBP is lower alongside the stronger USD and BRC food inflation at the lowest level since the series began in 2006, with the lacklustre UK services PMI release (56.2 vs. exp. 58.5) placing further misery on GBP as it fell to its lowest level since May 2013. Nonetheless, EUR has been provided some slight support following yesterday’s ECB sources which downplayed any further easing/action due to internal conflicts at the ECB. Also of note is a large USD 4.3bln option expiry at 1.2500 which rolls off today at the NYC cut build (-639k vs. Prev. 3200k). Furthermore, today’s DoE inventories are expected to reveal headline build of 2.35mln bbls and thus present further evidence of the further glut in US supply
Commodities
The USD strength has weighed on commodities with Gold hitting its lowest levels since April 2010 (Gold has now lost USD 80 since the FOMC on the 29th of Oct) and oil is at its lowest levels since October 2011 (also weighed on by a 4 month low in the HSBC China Services PMI and continued reverberations from Saudi's US oil price cut). Subsequently WTI prices have erased yesterday’s gains which occurred following the API crude inventories which showed a drawdown in crude stockpiles against last week’s build (-639k vs. Prev. 3200k). Furthermore, today’s DoE inventories are expected to reveal headline build of 2.35mln bbls and thus present further evidence of the further glut in US supply
Market Wrap
European shares remain higher, close to intraday highs, with the retail and construction sectors outperforming and basic resources, real estate underperforming. U.K. services index falls to 17-month low. Republicans gained control of the U.S. senate. Ruble falls to record as Russia moves closer to free float. Companies including Lafarge, Marks & Spencer, Alstom, ING released results. The Italian and Dutch markets are the best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. Japanese 10yr bond yields rise; German yields increase. Commodities decline, with silver, gold underperforming and natural gas outperforming. U.S.
- S&P 500 futures up 0.4% to 2014.3
- Stoxx 600 up 1.1% to 334.5
- US 10Yr yield up 2bps to 2.35%
- German 10Yr yield up 2bps to 0.82%
- MSCI Asia Pacific down 0.8% to 141
- Gold spot down 1.9% to $1146.4/oz
* * *
Jim Reid from DB concludes the overnight recap
Yesterday proved to be another tough day for financial markets in Europe. Despite a reasonable start to the day that saw the Stoxx 600 up nearly 0.5%in the first few hours, European stocks ended the day down by more than 1% with both the IBEX and FTSE MIB down by more than 2%. Two events appeared to weigh on equities. Markets turned post the release of the European Commission's (EC) autumn forecasts, where they lowered their projections on euro-area growth and inflation (more on this below), and then gathered further downward momentum following a Reuters article suggesting a divided ECB governing council. The article mentions that a number of ECB governing council members were angered back in September when Draghi effectively set a target for increasing the ECBs balance sheet in the press conference after the governing council explicitly agreed not to make any figure public. It also discusses that 7 and possibly as many as 10 of the 24 council members are against government bond QE. This probably highlights concerns that the ECB may remain behind the curve when it comes to monetary policy action as our economists highlighted in their ECB preview in the latest Focus Europe. The hurdle for the ECB to move to full-blown QE appears to be high. European credit also came under pressure as we saw a near 10bps intraday widening in Crossover following the Reuters article as the index ended the day around 6bps wider. European government bond yields reflected this weaker risk tone as 10 year Bund yields fell more than 4bps to 0.81%, their lowest level in about 3 weeks, while at the same time Italian and Spanish 10 year yields rose around 2bps and 4bps respectively.
In the US equities ended the day on a slightly more positive tone. Having tracked lower with European assets following the Reuters article (the S&P 500 as much as 0.8% lower) we saw a turn in fortunes for US equities after the European close, although the S&P 500 didn't manage to reverse all of the earlier losses ending the day down -0.3%. The Dow Jones did in fact make it back into positive territory ending the day marginally up (+0.1%). The main losers were in the energy sector as yesterday proved to be another difficult session for oil as Saudi Arabia unexpectedly cut its December selling price to US customers. WTI hit an intraday low of $75.48 and although we ended the day comfortably off this low ($77.19) we were still down 2.0% on the day and at the lowest closing level for more than 3 years. Brent saw an even greater decline (-2.3%) to around a 4 year low. This weighed on oil stocks as the S&P 500 energy sector ended the day down -1.9%. As we go to print both WTI and Brent futures have seen further marginal declines to currently stand at $77.14 and $82.48 respectively.
Staying on the US, we also had the trade data print yesterday which showed the deficit widening to $43bn in September, wider than expected ($40.2bn) with the weakness coming primarily from a drop in exports. Elsewhere on the data front factory orders were largely in line (-0.6%) while the ISM New York current business conditions came in below expectations (54.8 vs. 62.0 expected). Meanwhile as we type, the Republicans have gained control of the Senate as expected following victory in Iowa, securing the 6 additional seats needed and meaning Obama will face Republican congress for his last two years. S&P futures are relatively muted following the result.
Overnight in Asia markets are trading softer, not helped by a lower services PMI print in China (52.9 versus 53.3 last month). As we type bourses in Hong Kong and China are -0.4%, -0.2% respectively, dragged lower by energy stocks. In Japan the Nikkei has taken something of a breather following the rally since Friday and is currently broadly unchanged whilst the Yen is -0.3% versus the Dollar. Kuroda has made his first public appearance since Friday’s stimulus action and has helped to erase earlier losses in the day with the key takeaways from his speech being his pledge to stamp out the ‘deflationary mindset’ within the nation and that the BoJ stands ready to ease monetary policy again should there be any further risks to the inflation target.
Looking to the day ahead the main event on the data front will probably be the global services PMIs. In Europe expectations are for a fall in the Spanish number to 55.3 (55.8 previously) while the Italian services PMI is expected to rise to 49.4 (previously 48.8). In the US the non-manufacturing ISM is expected to decline to 58 from 58.6 last month. The other notable data release in the US today will be the ADP employment report, which is expected to come in at +220K. Both US data releases should provide important information on the state of the labour market and the broader economy ahead of Friday's October employment report. Additional data in Europe today includes euro area retail sales number for September. Aside from the data there are also a couple of speeches from Fed officials with Kocherlakota speaking on monetary policy in Minnesota, Lacker speaking on financial stability in Washington and Rosengren speaks at a conference on global banking standards in Lima (Peru).
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NOW JUST STFU LIBTARDS!
Does this mean I can ditch my sucky Obamacare?
20oz sodas for everyone.
I'm buying the first round!
And double cheese peperoni pizza for everybody too
WITH FRIES!
I'll buy the first keg.
The Parasite Party just got a major ass whopping.
But when does the Obama impeachment party begin?
Stop teasing us......and check Boehner for a pulse.
The crooks are gone... long live the crooks
So when do we get our next War and bank collapse?
Putin's already on your first item
And as for your second item:
NOW WATCH THE FERAL RESERVE COLLAPSE THE ECONOMY WORSE-ER-ER TO FUCK THE GOP OUT OF THE WH IN '16!!
ONE PERCENT PARTY!
By your favorite rapper team, M ItchhyMC Kane!!!!!
DA PARTY'Z ROLLIN'
AN EVERBODY'Z TROLLIN'
"SALL CHEAP BONDS N HOS
AN A DEFICIT BE GROWS
DA REPUBLIKINZ IZ FLY
C'AUZ DEY SHO AS HELL WON' TRY
TA FIX DA SYSTEM DAMN I MISSTEM THE PARTYCATS IZ BACK DON DISS DEM
BITCH!
DAT EFFEX SHIT IS DOPE
WIT JAPAN STUCK ON DAT ROPE
IT KEEPS EKWITEES N GEAR
AN' WE STICK IT IN YOUR REAR
CAUZZZZZ
IT'S A ONE PERCENT PARTY! IT'S A ONE PERCENT PARTY! IT'S A ONE PERCENT PARTY IT'S A ONE PERCENT PARTY!
HUH!
Eat your damn peas!
I hope Mochelle enjoy that election day fried chicken.
Let the impeachment and indictments get started (we wish).
Of they do not kill amnesty, kill ObaolaCare and indict Lois Lerner then they are worthless.
And please tar and feather and then burn at the stake (extra crispy) that clueless witch Pelosi who said "We have to pass Obabamcare to see what's in it"
AGGGGGHHHH!!!! Where's my pitchfork!!?
And many wondered if this mediocracy couldn’t get any worse.
“Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.” -- Albert Einstein
If all else fails....quote smart people.
Just remember......YES WE CAN......and we're about to get on that.
Sure, to be replaced by McConnellcare, or McCare for short...though it sounds like a McDonalds value meal, and is about as 'valuable'.
15 years ago i would be cheering the republican victories, but now-WHO GIVES A FLYING FUCK????
wisdom has its rewards,ha...
Take what U can get. A democratic defeat is enough of a victory.
How's the Donkey and Elephant show?
The Republicans are just as destructive as the Democrats. You may be cheering a Democratic defeat, but we are all still losing in the end.
Don't mistake my cheering for victory, because it is based solely on defeat of the exsisting majority. My take on elections is all about a very human trait: Schadenfreude.
As long as the republicans win now, and the democrats, next time, and then the republicans and then the democrats, all is as best as it can be, with incumbents losing.
I don't vote, not after the republicans took over Congress for the first time in 40 years, back in the early 90s and promptly proved themselves just as corrupt as the democrats.
Actually, the best thing that could have happened in 9/11/2001 would have been piloting one of the jumbo jets into the Capitol building, while CONgress was in full session.
Yeah but it's not going to kill us like Obolacare is doing now!
Sucks.....working 40 hr/wk is really gonna cut into my me time.
working 10 hrs / week(seriously tues=5, wed=5), do i qualify?
ok, listen to this fucking bullshit; walk out of the interview yesterday for service writer for incoming customer/vehicle repair at local auto center(fleetfarm) and i more or less have the job if i want(PT 25hr/week), but get this fucking shit=$10/hr!!! yea a whole fucking hamilton/hr. wooow , i floored at the generosity for a level of know;ledge/skill that should pay at least 15/hr IMO. fuck this fucked up fucking fascist corporate worker/slave state of affairs. many to many reasons for this STATISM OF AFFAIRS-FUCK EN EH...pS declining job as my vote to these fuckers that think i'm owned by their fucking rules. let em hire someone that more retarded than me, ha...
You're supposed to work part time and collect unemployment...
http://www.zerohedge.com/news/2014-11-04/canadas-head-central-banker-has-modest-proposal-you-should-consider-working-free
Euro's getting whacked
No-namer without money or any real campaign almost beats Vermont's "popular" governor:
http://tinyurl.com/ky8ku65
Still fail to see how any of this is good for stocks.
Maybe a big tax cut is in the offing here...but I certainly don't know of any.
These aren't a bunch of rookies coming back into town either. These guys know where all the bodies were buried...probably even their own.
This is the kick off to the Presidential btw....
Meanwhile in Europe the ECB seems to be at war with itself.
With weak PMIs and falling retail sales you would think they would try to be in agreement.
whatever we can say about the ECB, it is all about "war"
specifically, "currency war" among member countries. for me, those national bank governors can bitch among themselves as much as they want, as long as this does not result in a devaluation catfight among european currencies. we had enough of them in the past, thank you, but no, thanks
and this, in a nutshell, is the main reason for the very EUR, and so the ECB. or, as Tylers say, "Mutiny on the ECBounty, bitchez"
Looking back at the EUR now, it looks like it was meant to allow countries with well deserved record of shabby credit and related tendencies to devalue, to suddenly be able to borrow easily at low, low interest rates so they could buy German stuff. Grosso modo. And with the gigantic buildup of pain and strain you'd expect.
it would have been up either way. "they" own both parties. also - mcconnell looks like something from a wax museum.
I saw him say he was going to work for us last night....don't worry.....it's not going to happen.
here is a list of "us":
Top 5 Contributors, 2009 - 2014
Blackstone Group $225,400 $210,400 $15,000
Goldman Sachs $103,425 $93,425 $10,000
Humana Inc $99,300 $89,300 $10,000
JPMorgan Chase & Co $97,075 $87,075 $10,000
Kindred Healthcare $95,350 $80,350 $15,000
Do you seriously want to go there?
i'm just saying that he isn't necessarily lying
2014 contributions are peanuts compared to afore years.
.
You're too kind.
compared to pelosi or reid he is a god
So does this mean the show's over for a year? I was just about to pop more popcorn.
Better keep it popping. McCain's goimg to be Chair of the Armed Services Committee.
Sweet, so more jihadi photo-ops!
Not at all. This is the kick off to the Presidential. Folks will start announcing here quite soon. Scott Walker of Wisconsin is one. Jeb Bush and Mitt Romney are the other two (they can raise the 250 million in starter capital.)
You can ignore the President. He has no role to play in the next two years other than to be a Sitting Duck.
Unless he takes on Putin Mano a Mano he's got two years of being a punching bag to look forward to.
So the Dow has almost tripled since Obama was first elected, the economy is booming and unemployment has fallen sharply and the Democrats still lost this mid term election? Could it be that the voters don't buy all the lies anymore?
You mention two of the lies that voters didn't buy: "the economy is booming" and "unemployment has fallen sharply."
True the DOW has exploded but at the expense of the middle class. It is simply wealth redistribution by FED pump and dump. The artificially low interest rates are destroying the savings and investments of the average American and that is before that FED induced bubble pops. Then the real SHTF.
Will people ever realize how both parties have destroyed this nation?
.....U forgot the impact that .005% savings interest rates have had on fixed incomes.
Not that the R will do much of anything to change anything, but it is good to see the Democrats at least repudiated.
Call this a "Spite Victory".
And likely the harbinger of a hilary defeat in 2016. And THAT will put an end once and for all to the clinton takeover plans and seeing her move off into oblivion where she belongs is a welcome event, joyous even.
Could it be that the voters don't buy all the lies anymore?
Yes and they believe Republicans will get things in order.
The Republicans will approve fast-track authority for TPP and TTIP. Goodbye democracy, hello corporatocracy.
and the massive amount of fascism and communism going on under 0bama is whose fault?
Depends upon who you ask.
Both parties will report back to their Money Masters in Israel/Europe ASAP!
Oh happy days! The Reds beat the Blues, and some how some way millions of dimwitted voters think some big change is coming in their favor.
Same old shit over and over again!
Keep right on voting for big gubmint dumb-masses. I will never ever understand people that vote to tax and screw themselves!
Fucking morons!
So what, the new Senate passes bills that were held up by Reid. Obama vetoes them. Nothing changes. Obama is not running for office again so it's his way or no way.
Thank you for glorious gridlock.....maybe we should just send everyone home.
Sounds like a good idea, til you remember the one time they sent people home, a few stayed behind and passed the Federal Reserve Act.
Apparently the Democrats have painted themselves into a corner of useless.
http://m.youtube.com/watch?v=Y4781LWKYPk
Maha hahahahahaaa
Thank you America.
Now that the election is over, when is QE5 going to be announced, Janurary?
Hunt Brothers trade in the $NG market now? http://finviz.com/futures_charts.ashx?t=NG&p=h1
.... Now just a few days away from free silver, Hot.
After that, the dealers will be paying you to take it off their hands!
/s/
before new year, so they can buy presents
How can anybody over the age of 30 still think it matters which Demublican get elected? It's just one party pretending to be two parties, and, no matter who wins, America loses.
But Im gonna eat ma fried chicken anyway.
Elections may not matter, and it may all be Kabuki theater, but denial is still a river in Egypt.
http://newsbusters.org/ has compiled the liberal media's take on last nights events...
Standard Disclaimer: If this is all a script, where is the room full of monkeys banging away on the keyboards?
Watch how quick Boehner pulls Obama's dick out of his mouth and starts dancing the other way. It'll be fun to watch. As for McConnell, he's a dyed in the wool RINO. But maybe this is the start of something.
Wow! It's almost as if the "change in power" that happens every other election is scripted or something.
Yay, the (R)'s won.....pfft
A different road to hell still takes you there, this one is just a little longer.
So much for the tree hugger "peak oil" theory. You fuck up demand and the price falls. Economics 101
How Mitch McConnell did it?...
You've got to be shitting us?!!!...
We've been getting ass raped by these clowns for the last 3 decades of which the last 13 have no equivalent in the history of mankind and you want to tell us the secret behind Mitch McConnell's victory???!
Here's the cliffnotes version...
It involves a very wealthy fat ugly circumcised pile "" from an "oasis" out in the Nevada desert that loves sand (like they all do) that gave him a briefcase full of "green worthless shit paper" and said -start a war with Russia or else!...
And lest I forget...
His so-called constituents in his home state of Kentucky who are more worried about which BBQ joint they will hang out at to watch the University of Kentucky and Lousiville play this weekend with their over burdened paycheck that gives 38% of it to him every week (not including the sales tax and personal property) to "start that war"!
Don't exaggerate
Get a grip... please.
"Kuroda has made his first public appearance since Friday’s stimulus action and has helped to erase earlier losses in the day with the key takeaways from his speech being his pledge to stamp out the ‘deflationary mindset’ within the nation and that the BoJ stands ready to ease monetary policy again should there be any further risks to the inflation target."
Widespread prosperity is the cure for deflation and you can't devalue your way to widespread prosperity. When are these central planners going to finally get that?
The other story is the meteoric rise of the USD - which is pounding down commodities - as expected.
What hasn't happened is the decline in US indexes as show below:
http://bullandbearmash.com/spx-inverted-relationship-usd-usd-sharply-spx...
USD needs to fall or the US indexes will get crushed - pressure is mounting folks. Mid-terms over so barry doesn't give a shit about markets anymore.
To think all has changed and turned on a dime is wrong. For Washington to fix all that is wrong with our economy would be like turning a battleship in a bathtub. Today I make no predictions and have few expectations because when I awoke it was to a market where stock futures were soaring ever higher even as important economic numbers being released continue to come in below expectations. As the stock market continues to remain at historic highs please tell me what is so good? What is so much better?
As I see it the weight of carrying a large number of unemployed and people who have dropped out of the work force is wearing society down through attrition. The article below points out some of the glaring flaws in the argument that blue sky lies ahead as the stock market seems to indicate. As I look at a landscape of empty and under-leased buildings that once housed thriving businesses that provided Americans with good paying jobs I'm forced to ask, How are things getting better?
http://brucewilds.blogspot.com/2014/10/tell-me-again-how-things-are-getting.html