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All Eyes On The Freefalling Yen Which Just Plunged To Fresh 7 Year Lows
Once again all eyes are on the carry-trade driving Yen, whose avalance into oblivion is picking up speed, and where the formerly unimaginable USDJPY level of 120 as presented here in September, is now looking like this week's business, with the only question how long until Albert Edwards' next target of 145 is hit leading to nuclear currency warfare between Japan, Korea, China and ultimately, the US and Europe. Unfortunately, for Japan, at this point the terminal currency collapse will do nothing to incrementally boost exports or its economy, and the former Japan finmin was on the tape warning again that the Japanese recession will persist as USDJPY over 115 is now hurting Japan, something which should by now have been clear to most.
Then again with a money-printing Keynesian lunatic in charge, for whom there is now no turning back, Japan really has no options. The good news, at least for the US which is now openly pulling the strings behind Japan's monetary policy, is that the soaring Yen will continue to drag correlation algos higher, and send the S&P500 to fresh all time highs even as the Japanese economy is devastated.
In other news, the much hyped Stock Connect between China and Hong Kong is a dud with volumes plunging and CLSA calling it a ghost traing. According to Bloomberg, about 2.6 billion yuan, or 20%, of the 13 billion yuan northbound daily quota was taken on day 3 of the link vs 100% and 37% on the 2 opening days. Of the Shanghai connect stocks, 242 were up, and 249 down; of the Hong Kong connect stocks only 81 were up, while 159 down.
Worse, the commodity rout continues, with the slide in iron ore prices has been a particular focus in the commodity complex with Dalian iron futures hitting a second consecutive record low as data in China continues to fail to impress. Nonetheless, precious metal prices have continued to see support with spot gold managing to break out of its tight overnight range to touch the USD 1,200/oz level
European equities enter the North American crossover mostly in the green after picking up off their worst levels which were seen earlier in the session following overnight weakness in Asian equities and pulling back some of yesterday’s gains. In terms of the rebound, nothing fundamental has been attributed the move higher, although it does coincide with the Gilt-led softness seen in fixed income products following the less dovish than expected BoE minutes release, which also saw short-sterling reverse its earlier flattening pattern. Despite the upside for European stocks, the FTSE 100 trades in the red as the continuing decline in iron prices has placed weight on the mining-heavy FTSE index, with names such as Rio Tinto and Antofagasta seeing a bout of underperformance.
In summary: European stocks near session high; insurance, construction shares outperform, miners decline. Bank of England minutes show that MPC voted 7-2 in Nov. Dollar reaches seven-yr high vs. yen. Asian shares decline, U.S. stock- index futures little-changed ahead of FOMC minutes.
On today's US calendar we get the October update on US housing starts, building permits, DoE crude oil inventories and of course the FOMC minutes release
Market Wrap
- S&P 500 futures up 0% to 2048.9
- Stoxx 600 up 0.3% to 340.3
- US 10Yr yield up 2bps to 2.
- German 10Yr yield up 4bps to 0.84%
- MSCI Asia Pacific down 0.7% to 139.7
- Gold spot down 0% to $1196.8/oz
Bulletin Headlines Summary
- GBP/USD pulls off session lows following a less dovish than anticipated BoE minutes release, which has also placed pressure on fixed income products.
- European equities trade mostly in the green with no sustained direction, although the FTSE 100 underperforms as Iron ore miners continue to feel the squeeze of the slide in iron ore prices.
- Looking ahead, attention turns towards the release of US housing starts, building permits, DoE crude oil inventories and of course the FOMC minutes release.
- Treasuries decline with core euro zone sovereigns amid heavy corporate issuance calendar and as investors awaits release of minutes from Fed’s October meeting.
- Bank of England policy makers voted 7-2 to keep the key interest rate at a record low this month as some of the majority began to raise concerns about potential inflation pressures
- Obama plans to issue a reprieve for undocumented immigrants whose children were born in the U.S., part of an order that would shield between 4m and 5m from deportation, according to people familiar with the proposal
- Prime Minister Shinzo Abe invoked the American Revolution in calling a snap election and shelving a further increase in a tax that sank Japan into recession
- BOJ’s Kuroda secured a wider majority today and warned inflation could fall below 1% after the world’s third- largest economy slid into recession
- Keystone XL pipeline backers came up one vote short in the Senate and vowed to try again in January, when they expect to have enough support to send a bill to Obama
- Sovereign yields mostly higher. Asian stocks mostly lower. European stocks gain, U.S. equity-index futures lower. Brent crude and gold higher, copper falls
US Event Calendar
- 7:00am: MBA Mortgage Applications, Nov. 14 (prior -0.9%)
- 8:30am: Housing Starts, Oct., est. 1.025m (prior 1.017m)
- Housing Starts m/m, Oct., est. 0.8% (prior 6.3%)
- Building Permits, Oct., est. 1.040m (prior 1.018m, revised 1.031m)
- Building Permits m/m, Oct., est. 0.9% (prior 1.5%, revised 2.8%)
- 2:00pm: Minutes of October 28-29 FOMC meeting released
FX
One of the more notable movers in FX markets has been GBP following the BoE minutes. Despite residing at session lows in anticipation of an overtly dovish release, GBP saw a sharp move higher as the report revealed a 7-2 split and was not as dovish as some had expected. More specifically, particular focus was paid on comments that a tighter labour market is likely to lead to wage growth soon and the fact that the MPC majority said there is a risk of inflation overshooting the 2% target. Furthermore, CAD has continued to weaken with weakness being attributed to the failure of the Keystone pipeline bill to be passed in the Senate which would have seen the construction of an oil pipeline from Canada to US gulf refineries. Additionally, the decline in iron ore prices has filtered through to FX markets, with AUD seen lower throughout overnight and European trade with yesterday’s jaw-boning of the AUD and cross-related selling in AUD/JPY also placing further weight on the Antipodean currency. Elsewhere, overnight, USD/JPY broke back above 117.00 to trade at its highest since
COMMODITIES
The slide in iron ore prices has been a particular focus in the commodity complex with Dalian iron futures hitting a second consecutive record low as data in China continues to fail to impress. Nonetheless, precious metal prices have continued to see support with spot gold managing to break out of its tight overnight range to touch the USD 1,200/oz level. In the energy complex, despite opening lower following last nights API inventories which revealed a build of 3700k vs. Prev. drawdown of 1500k, energy prices have ebbed higher throughout European trade as participants look ahead to today’s DoE inventories with the headline expected to reveal a drawdown of 1500k, a number which is higher than initially forecasted.
DB's Jim Reid Concludes the Overnight Recap
So after much excitement yesterday following Prime Minister Abe’s snap election announcement, sales-tax delay and planned stimulus package all eyes have turned to the BoJ meeting this morning. In terms of the headlines, as expected QE has remained steady at ¥80tn annually with the board having voted 8-1 in favour. After last month's 5-4 vote it seems consensus has been built around the new measures which will be a relief to policy makers, especially after the measures announced this week. Taking a closer look at the details, the central bank notes that the outlook in Japan’s economy is ‘expected to continue its moderate recovery trend, and the effects including those of the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike are expected to dissipate gradually’. CPI is expected to remain at the current level for the time being whilst there is some mention that QQE is so far exerting its intended effects with the Bank expected to continue with stimulus for as long as necessary to achieve the 2% target. The result is certainly a positive for Kuroda following what was largely a split decision last month on extending QE. The press conference takes place as we go to print so this is worth keeping an eye on for Kuroda's take on this week's fiscal events.
In terms of how markets are reacting post BoJ, the Nikkei is currently trading -0.14% having opened around +0.7% stronger and then declining to trade -0.3% lower post the decision. The JPY has weakened a further 0.37% versus the Dollar to now trade at 117.29 and mark a seven year low. Elsewhere bourses are mixed around Asia. The CSI 300, Hang Seng and Kospi are +0.11%, -0.41% and -0.01% respectively.
As well as the BoJ news to digest today, we’ve also got the FOMC minutes to look forward to later. It’s easy to make an argument either way with regards to what we might expect. On the one hand, we could make a case that the details could be something of a non-event with the focus shifting immediately to the December meeting. On the other hand DB’s Joe Lavorgna summed it up well at the start of the week, commenting that the statement from the October 28th- 29th meeting was notably more hawkish than expected, particularly with regards to the economy and upgrading its assessment of the labour market. Joe also mentions the lack of commentary around a stronger dollar or recently tightening financial conditions, so conceivably these could be mentioned. All in all the key will be whether the minutes rubber stamp the edging up in hawkishness or whether it will throw the doves an olive branch.
Whilst on the US, the S&P 500 continues to extend its record closing highs (+0.51%) after trading in a relatively narrow range over the past week. As well as being supported from the positive tone extending from Abe’s announcement, macro data did little to dampen sentiment. The NAHB housing market index surprised to the upside with the 58 print ahead of expectations of a 55 reading. Digging deeper into the details, all three subcomponents of the index - present conditions, expectations and buyers traffic - rose along with gains in all four regions of the country to cause the index to print just short of September’s post recession high (59). Our US colleagues point out that the NAHB series leads housing construction by around six months and so they expect a marked improvement in residential construction over the next couple of quarters, boosting total housing-related spending which they feel is enough to sustain a 3%-plus real GDP growth over next year. - a pretty bold call. Meanwhile the PPI reading for October was relatively strong. The headline (+0.2% mom) reading and ex. food and energy print (+0.4% mom) beat expectations of -0.1% and +0.1% respectively. Away from the macro prints, the Fed’s Kocherlakota was in the press once again, this time commenting that the Fed is risking its credibility by not acting aggressively enough to bring inflation back up to its 2% target. He also reiterated that inflation will not rise back to this target until 2018 with the potential for a turnaround in inflation through 2015 ‘very unlikely’. Treasuries were generally stronger across the board, the 10yr rallying 2bps whilst the DXY closed down 0.33% at the end of play.
Turning our focus to Europe yesterday, the Stoxx 600 closed +0.61% and the Euro rallied +0.67% versus the Dollar following an unexpectedly stronger German ZEW survey print with the 11.5 reading (0.5 expected) marking the first rise in German investor confidence for eleven months. Closer to home, UK CPI data was largely in line. The +1.3% yoy headline figure a touch higher than the +1.2% consensus although the core print came in slightly under expectations at +1.5% yoy (vs. +1.6% yoy expected). DB’s George Buckley noted that despite yesterday’s print showing a slight rise, he is revising his forecasts down to +0.9% by year end, rising to +1.6% in 2015 and then +1.9% in 2016, highlighting in particular that December will be a likely flashpoint for the CPI given the +6.4% rise in household energy bills last year not being repeated and thus taking 0.3% off the headline rate. Interestingly George also points out a move in sterling could take over three years to fully impact CPI inflation, suggesting that the annual rise in Sterling to peak in July this year will likely impact CPI towards the end of 2016. Elsewhere the RPI print came in line at +2.3% yoy whilst PPI input was softer at -8.4% yoy (-8.3% yoy expected). Gilts closed flat and elsewhere 10y Bunds ended 0.5bp firmer. Credit markets generally underperformed, Xover finished 4bps wider over the day although we highlight that this was perhaps due to more technical factors around significant new issuance. New issuance in the US market is also causing some indigestion.
Just wrapping up the market moves yesterday, WTI and Brent extended declines, down 1.68% and 1.21% respectively and have continued to trade weaker overnight. Ahead of the OPEC meeting next week, the FT has reported the apparent lack of consensus between members which is underlying the struggles the group is facing given surging US output. In terms of an outcome for the meeting, a disagreement between members is surely a worst case scenario so it will be interesting to see if we hear any of the major producers align comments in the mean time.
In terms of the highlights today, we kick off in Europe this morning with the September construction output print (market looking for +1.5% mom) along with current account data whilst later in the day we expect to hear from the ECB’s Praet speaking on the ‘long-term financing of the economy’ in Frankfurt. As well as this, we will be keeping an eye on the BoE’s November minutes today. Over in the US and away from the highlighted FOMC minutes we have October building permits and housing starts data (DB expecting 1.1m versus 1.025m consensus) and the MBA’s new mortgage applications. Given the strong NAHB print yesterday it will be interesting to see whether today's housing data confirms the trend.
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Preview of coming attractions everywhere else.
Everything is exagerated for consumption.
Breaking news in a moment: The fart that broke the camel's back.
And BTW there is no more fucking winter anymore, now we have Polar Vortices.
It's time for some hope and change in Japan.
It won't accomplish anything....but it's a hell of a slogan.
Nuclear currency wars. This sounds exciting.
Looking forward to watching the Japanes and Chinese duke it out. How many more ghost cities can the Chinese build? Or, in the alternative, China could go nuclear and allow their citizens to invest exclusivly, say, in Europe, and then watch Draghi shit a cinder block as the EUR skyrockets and China exports deflation to the EUR.
Edit 1 -
Zhou Xiaochuan - "Here my Communist friends. Free cash for everyone. It is in a bank account that can only be used within the EMZ. Everyone go buy a castle or two. <3"
Edit 2 -
The thought of Chinese cash flooding Berlin and pissing off all the grunge hipsters makes me almost giddy.
"Something which by now should have been clear to all",,,,,,Except Central Bankers and Paul Krugman
As always, if your imports exceed your exports, a sinking currency only makes things worse.
A few exporters gain at the larger expense of the importers.
Oh, is that "the little people"?
Sure is!
Fruk U!!
I don't feel tardy.
Sit down Waldo!
http://www.youtube.com/watch?v=b_lio51Z1qc
I've got my pencil.....give me something to write on.
Class dismissed!
Abenomics = the literal iteration of Krugmanomics in real time.
What gets to 0 first, the worth of the Japanese Yen, or the patience of the Japanese people, as they watch their standard of living - commensurate with their purchasing power - crash and burn?
The Race to Debase Currency in Asia with Haste Falls Directly on Krugman's Face
"the central bank notes that the outlook in Japan’s economy is ‘expected to continue its moderate recovery trend...' "
Bullshit. There ain't no recovery, and the decline is not moderate in the least.
The Liars are covering for the Thieves who are paying tribute to the Killers. Welcome to the Animal Farm. If you're not one of these three, you're livestock. Shearing is out, skinning is in. Consider yourself warned.
I'm getting the fuck out, post haste. Japan is going Zimbabwe. Only difference is the Yen is part of the IMF's SDR currency basket, so the International Finance Syndicate will try any means necessary to keep the Ponzi going. If the Yen goes, the rest follows.
Apparently, no one ever translated "The Fatal Conceit" into Japanese!
The falling value of both the yen and euro will reek havoc through contagion. For months the major world currencies had traded in a narrow range as if held in limbo by some great force. This has allowed people to think we were on sound footing as central banks across the world continued to print and pump out money chasing the "ever elusive growth" that always appears to be just around the corner. Recently several major currencies made multi-year highs or lows depending on the match-up .
The Fed recently whacked the dollar down but for how long? Because of weak demand for goods and most of this freshly printed money flowing into intangible investments inflation has not been a major problem, but the seeds for its future growth have been planted everywhere. John Maynard Keynes said By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
While there are not many Bond Vigilantes there are a slew of Currency Vigilantes and they are ready to make their presence known. Weakness in the value of the Yen, Pound, and Euro must not go unnoticed. More on why this may be a signal that currency trading is about to get very wild in the article below. Please note, this may also be sending a signal that the whole system is unstable and the stock market could drop like a stone due to contagion.
http://brucewilds.blogspot.com/2014/09/caution-alert-currencies-may-get-wild.html
Whothefuckcaresanymoreaboutthisshit?
Youdoenoughtorespond.
We got one!
Member for 5 years 20 weeks....activated on 11/03/2014 - 13:01.....for what purpose we're not exactly sure.
US/Yen has been rejecting levels from 115 to 116.50 since last Monday, didn't look like it was going to stick around. Tentative moves up to 117.50, getting ready for another big push?
Severe acceleration at 120. Ladies and gentlmen, we may experience turbulence. And when I say "ladies and gentlemen", I do mean that in the loosest of terms.
Lol. Yup, could well be, feels like the calm before the parabolic.
It's a good time to trade yen for gold.
Look for 140
I'm pretty happy. I guess I'm pretty fucked up when I'm gleeful at any prospect of the bread and circuses ending.
How do you feel about rice and Kabuki Theatre as a hedonic substitute?
Book it, that trunk is almost full.
The misery index on zh just may be higher than in japan. In fact, speaking personally, I'm pretty sure it is. :)
Wake me up when it's over.
Oh hell no.....if I have to watch this crap.....so do you.
the race to the bottom is accelerating. inflation will go exponential soon.
Dow 45,000 here we come.
Bit off topic. Apologies.
Check this right.
I'm with my wife in her bank (HSBC) now and she is trying to withdrawer 7k and we have been here approximately 1 hr so far. My wife will not tell them what the money is for because it is her money and she's an adult. They said it is their policy to know what it is for. My wife has asked the manager whether this is law and the manager said that it is HSBC guidelines. Currently my wife has said that if she doesn't get her money then she will call the police. They are making a phone call for clearance and we are waiting in waiting area. Interesting times....
Tell them it's for laundering drug money. HSBC should be fine with that.
Not if they don't get a cut.
Ask 'em for the boxes that fit Mexican teller windows.
You do know HSBC was founded by Opium Warriors right?
Beautiful!
Yup ... I'd be closing the account right there and saying the reason was that the bank would not give her her money ... but from a legal perspective, it is no longer your money or your wife's money. You gave HSBC an almost no interest unsecured loan and you are a creditor in line behind many other creditors.
Technically when she gave HSBC her money it became their money. Hard currency while we still can mate.
Legally (not technically) ... it has been a case back from 1930s I think...
You've got one bad ass wife there, and I mean that as a compliment. And this is exactly why my wife and I have six or seven bank accounts with hardly any cash left on any of them.
Wishing you all the best with the clearance procedure.
Outrageous! I´d be ditching that bank pronto.
Thanks for advice fellas. She's closed the acc and transferred money over to our joint acc in another bank. Probably not much better to be honest. Police said it was a civil matter take it up with citizens advice. Fucking criminals. I lost it and had to leave the bank telling them that everyone and everything is being logged for future justice. They grinned. Having a smoke and trying to calm down.....
its not just HSBC Wellsfargo pulls that crap above 2,000
Now that's clearly not true. I bank with WF and have for years and pull out nearly my entire paycheck in cash every payday, no questions asked.
try my branch in Somerville NJ..... or better yet ask the branch manager what their policy is....
It won't help keep inflation in check in the US because too many of the Japanese products are no longer manufactured in Japan. The cars for the US are made in the US and the consumer goods in China or SE Asia.
In the longer run, if it causes Japanese companies to bring manufacturing back to Japan, then it will simply decrease the number of manufacturing jobs outside of Japan.
It is just another manipulation and attack on Japan, with complicit and traitorous Japanese government officials.
Most likely they are being blackmailed.
Most likely they are being blackmailed.
Like Justice Roberts? Damn those evil bastards!
Americans be like, "Its just Japan. Its all the way across the ocean!".
A month ago, they were like, "Its just Africa. Its all the way across the ocean!".
I wonder what Godzilla thinks of all this?
He´s happy as hell right now watching all the mutants growing up around him under the Pacific. Job security and all that is hard to come by in the 21st century...especially when your getting old.
It's not going to stop at 120, or even 145;nope, USDJPY = 300 coming soon. You can't stop the avalanche.
www.traderzoo.mobi
No snowflake ever feels responsible for the avalanche.
'YCL' : Proshares Double Long Yen ETF. What could possibly go wrong?
http://finance.yahoo.com/q?s=YCL
Japs talking about a corporate tax cut - further weaking the yen...
Let me guess- when the yen causes the greatest currency/swaps/derivatives disaster ever, the fed -Wall Street-Academia will be stunned.
Zimbabwe 2.0 coming up.
...this is my twin sister. Her name, 'Fook Yu.' Fook Mi, Fook Yu. [/Goldmember]
@Drummond , this happenened to my daughter a couple years back in Lloyds TSB in UK, she was withdrawing £20,000, we had given them a weeks warning cos, you know , the banks dont actually have much money, the cash is all counted out and sitting on the other side of the glass and the cashier is trying to make "innocent" conversation, like oh are you going on holiday ? me and daughter ignore her and just look at each other like none of your G,damn business, then she gives up the innocent pretense and sheepishly says "I,m sorry but before I give you this money I have to ask some questions. We are like "yeah what?". "where did you get this money from and what are you going to do with it ?" I just raised both hands up turned round and shouted really loud "listen up everybody, these people are demanding to know what we are going to do with OUR money before they give it to us !" Big fluster and they hustled both of us into the managers office, who pratted on about "terrorism" and "money laundering". I asked if he had any EVIDENCE that my daughter was a "terrorist" or "gangster", he replied that most people just answered the questions, at which point my daughter , god bless her, flew at him and said "thats because most people are fucking stupid and dont know they have rights , I trusted you with my money , now are you going to give it to me ?" at which point I just laughed , pulled out my phone and said you got 5 seconds before I phone the police and report a bank robbery (i,e the bank is robbing us). They gave us the money !
+1 thats a great story. and how little they understand about it and that just because they have these rules that they make up you should follow them blindly and not ask questions. fuckers.
Since no one else thought to say it. BULLISH....................
A race to devalue. These PhDs at the Fed and IMF must have failed history. We know what the end game will be. Fiat will be trash.
Next PhD Federal Reserve game is IMF SDRs. Instantly you wake up one day and it's announced you turn in your dollars for the new world fiat. Substantially decreasing any money you have in the bank.
Yen is part of the SDR, so it won't be that. My guess is something far worse.
The fall of the Yen has been berry berry good to me.
I wonder if the Japanese have been stacking? Or just continuing to shop the latest fads and fashions, while living at home with the parents?
Japan has completely blown it with the recent moves. To tell the world you are going to print money out of thin air and use it to buy up the world's stocks is asking for your currency to collapse. If they don't reverse course, Albert Edwards 145 target will look quaint.