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Stocks Rebound, Oil Resumes Slide, Ruble Tumbles As Yen Flirts With 119
A few days of near-record crude volatility (which the CME is scrambling to reduce following 2 crude margin hikes in the past week) is giving way to the New Normal default thinking: that central banks will soon take care of everything.
And sure enough, just an hour earlier, US equity futures had jumped 8 points on virtually zero volume, wiping out all of yesterday's losses, driven higher by that new "old favorite", the USDJPY, which has once again resumed its climb higher, briefly rising above 119.00 once again and sending the Nikkei and the Topix to fresh 7 year highs, perfectly oblivious to both yesterday's Moody's downgrade and now open warnings from both Eisuke Sakakibara and Goldman Sachs that further declines in the Yen will accelerate the collapse of the Japanese economy. And, since there is also zero liquidity in the market, that entire gain was also just as promptly wiped out with futures now practically unchanged from yesterday's close.
With everyone focused on crude, it is worth noting that both Brent and WTI have resumed their downward trend, down a little over 1% each, following yesterday's mad short-covering scramble which may have been all the dead cat bounce we will get this time around as Saudi appears perfectly happy to send Brent to $60 or even lower.
The other thing everyone appears to be focused on these days is Russia, which earlier announced its economy would shrink 0.8% next year on oil price drop, sanctions. The immediate result was a sharp reversal in the Ruble, which wiped away all gains and tumbled to another day of record lows against western currencies, sliding 2.3% against the dollar. Comments from VTB Chairman Dubinin who said there was "some panic" in the Russian bank system did not help the mood. The Ruble has now declined 30% since the end of September. Russia’s 5yr CDS widened a further 26bps yesterday to 344bps whilst the 10y government bond yield finished 15bps higher at 10.76%. The moves also come on the back of an announcement by the Finance Minister Siluanov last week that capital flight may reach $130bn in 2014 - the most since 2009.
This morning’s European session initially kicked off on a positive note with the DAX breaking above 10,000 for the first time since June 2014 after tripping stops at the handle, although the index has since come off best levels on concerns over Russian. On a sector specific basis, basic materials and energy names led the way higher for European equities following on from yesterday’s gains in the commodities complex, which subsequently saw some mild outperformance for the FTSE 100. However, gains for oil services names have been limited by news that Russia are to abandon their Southstream pipeline plans. Furthermore, financials are also seen higher in a continuation of the trend seen overnight on the expectation that the PBoC may implement further easing policies. Elsewhere, Bunds have crept higher throughout the European session helped with the decline in equities and thus paring some of yesterday’s fixed income-related losses following positive US ISM manufacturing and rate lock selling due to a large corporate bond issuance.
Switching focus to Asia, the Japan Topix is modestly stronger (+0.49%) and shrugging off Moody's sovereign rating cut yesterday (to A1/stable from Aa3). For the record, Japan's foreign currency rating is still AA-/Neg by S&P and A+/Neg by Fitch. The Moody's action comes just before Prime Minister Abe commences his campaign today ahead of the election later this month. Just on the subject, the Nikkei QUICK monthly bond survey yesterday showed that respondents saw a 79.9% probability that the LDP/Komeito ruling coalition would do better than its stated victory of 270 seats. Away from Japan, with the exception of Korea, major bourses are largely trading in the green. The Hang Seng (+0.74%), Shanghai Composite (+1.80%) and ASX 200 (+1.41%) are all trading firmer. On the latter, the RBA has kept its benchmark rate unchanged at 2.50% (as expected by most) overnight but it is worth noting that our Australian economist now expects a cumulative 50bps cut by the RBA in 2015 citing a forecasts of rising unemployment, nascent signs of moderation in house price growth and ongoing commodity price declines. This is a non-consensus call by DB so we'll see if the street follows from here.
Looking at today’s calendar, In the US this afternoon we’ve got the ISM NY due with the market expecting a slight uptick to 55.0 (from 54.8). Shortly after, we get the construction spending print which is expected to increase – residential construction in particular is expected to show a decent gain given the improvements in housing permits. We round today off with November vehicle sales data in the US. In terms of Fedspeak, early this afternoon both Fischer and Yellen will be talking in Washington so watch out headlines here.
Bulletin Headline Summary from Bloomberg and Ransquawk
- With the lack of any tier 1 economic data and lingering concerns over Russia, equities have edged lower (Eurostoxx50 -0.1%), Bunds have retraced some of yesterday’s losses and commodities are on the back foot with WTI trading marginally below USD 68 and Gold below USD 1200.
- Treasuries mixed, curve spreads flatten as U.S. investment-grade calendar builds, with AMZN 5- part likely to price today after MDT sold $17b yesterday in year’s largest deal.
- Europe’s latest bank stress test was flawed, and dozens of the region’s lenders, including Deutsche Bank and BNP Paribas, aren’t sufficiently capitalized to improve the economy’s anemic growth or withstand a repeat of the 2008 financial crisis
- The EU faces a rebuke from global regulators for shortcomings in its implementation of bank capital rules, according to two people with knowledge of the matter
- Russia is entering its first recession since 2009 as sanctions over the Ukraine conflict combine with plunging oil prices and the weakening ruble to hammer the economy and force the government to prop up banks
- China is tightening checks on local bond sales in its latest bid to reduce risks as debt loads surge to a record amid slowing economic growth
- Prime Minister Shinzo Abe took his economic message to Japan’s regions today, starting his campaign for re-election with the country in recession
- The 3Q contraction that tipped Japan into recession may not be as sharp as first thought, with economists revising gross domestic product forecasts
- Greece needs a debt haircut and easier servicing costs, Greek opposition Alexis Tsipras said at a conference today; also said Syriza will be at forefront of radical progressive change in Europe
- Sovereign yields rise. Asian stocks gain; European stocks, U.S. equity-index futures rise. Brent crude and gold fall, copper rises
- Looking ahead, attention turns to ISM New York and API Crude Inventories
and any comments from Fed’s Fischer, Yellen and Brainard.
US Event Calendar
- 9:45am: ISM New York, Nov. est. 55 (prior 54.8)
- 10:00am: Construction Spending, Oct., est. 0.6% (prior -0.4%)
- TBA: Wards Total Vehicle Sales, Nov., est. 16.6m (prior 16.35m)
- Wards Domestic Vehicle Sales, Nov., est. 13.30m (prior 13.12m)
Central Banks
- 8:10am: Fed’s Fischer speaks in Washington
- 8:30am: Fed’s Yellen speaks in Washington
- 12:00: Fed’s Brainard speaks via video to conference in Los Angeles
FX
The USD remains broadly stronger alongside the recovery in US yield, which has subsequently seen USD/JPY ebb higher back towards the 119.00 handle amid favourable interest differential flows. Elsewhere, AUD was seen higher overnight following a less-dovish than anticipated RBA despite the recent slump in commodity prices, however, this upside has since been pared following the movements in the USD-index with RANsquawk sources also reporting Middle-Eastern selling in the pair. Elsewhere, heading into the North American crossover, the RUB is once again seen weaker as concerns over the Russia economy remain at the forefront with the Russian Finance Ministry warning of a potential recession in Q1 2015.
COMMODITIES
In terms of precious metals, gold has ebbed lower breaking back below USD 1,200.00 after retracing around 38.25% of the move, furthermore, on a geopolitical front tensions appear to be easing between Ukraine and Russia amid reports that the Ukraine and Russian rebels could reach a truce following the recent fighting around Donetsk airport. In the energy complex oil is trading in negative territory and is trading around the USD 68.00 level in what has been a relatively choppy morning with price movements largely led by USD fluctuations. Nonetheless, expectations for tomorrow’s DoE inventories are looking for yet another build for the headline figure and thus due to further increase the global glut of supply in oil markets
DB's Jim Reid Completes the overnight Event Summary
The falling oil price continues to dominate the agenda at the moment although we did see some respite yesterday. Both WTI (+4.31%) and Brent (+3.41%) finished the NY session off the morning session lows to close at around $69 and $72 respectively although they are somewhat softer in the overnight Asian session (more below). The rebound in Oil yesterday also coincided with what was generally a firmer day across the commodity complex. After falling to a three week low on the back of the SNB vote over the weekend, Gold was +3.83% stronger yesterday at $1212.10 whilst Silver traded +6.53% to close at $16.46/oz. For equities it was a fairly weak day for the S&P 500 (-0.68%) despite the rebound of Energy stocks (+0.7%) as the market was weighed down by losses in 8 out of the ten major sector groups. Industrials (-1.29%), IT (-1.11%) and Consumer Discretionary (-1.09%) were main decliners at the end of play which to some degree probably reflects the sluggishness of the retail numbers coming out from the Thanksgiving weekend.
Away from the strength in commodities and the weakness in equities, the move in Treasuries was another big theme yesterday. The 10yr benchmark reversed Friday’s gains to close 7bp wider at 2.235%. Some hawkish comments from the Fed’s Dudley probably didn't help matters after the NY Fed President suggested that a mid-2015 rate hike still seemed reasonable. To be fair though he did highlight the need for patience over rate hikes but the market seemed to zoom in on Dudley's comments that an increase would be a ‘welcome development’ and signal that the economy has healed enough to warrant ‘somewhat less accommodative’ policy, even if we see a bump or two in financial markets. Highlighting the moves in the oil price, Dudley also noted that the recent drop in prices was a clear positive for the US economy and that it could spur more expansive monetary policy in other countries by pulling down inflation. Elsewhere, the Fed’s Fisher was quoted on Reuters downplaying the dis-inflationary effect of the fall in the oil price – commenting specifically that it would be a ‘temporary’ drag on inflation and ultimately lower energy costs would help growth in the US.
Away from Fed speak and Oil, the ISM reading yesterday was also a notable release for markets. November's manufacturing ISM survey (58.7 vs. 58.0) came in a touch above consensus. Whilst this is a tad lower than the 59 print in October it was still the third highest reading for the current business cycle. Prices paid fell nine points to 44.5 in November (lowest reading since July 2012) which was largely driven by the sharp decline in energy prices.
Taking a look at developments on the other side of the Atlantic we saw the Stoxx 600 close -0.46% lower and Xover widen 10bps on the day probably not supported by what was seen to be a generally soft set of data. The final November manufacturing PMI for the Euro-area printed at 50.1, down from the 50.4 flash estimate and 50.6 October reading. DB’s Peter Sidorov notes that the details in the report were not particularly encouraging either. With new orders falling by 0.8pts and new export orders unchanged it suggests that the weakness in manufacturing cannot be explained simply by external weakness.
Regionally across Europe, the German manufacturing PMI disappointed 49.5 (revised down 0.5pts from the flash estimate) and is now at its weakest level since June 2013. The French reading was revised up (to 48.4) but declined 0.1pts relative to the October print whilst the Italian reading was unchanged at 49. Spain was a relative standout registering a 2.1pt rise to 54.7 marking a new post-2007 high. Peripheral bonds performed well yesterday as 10y benchmark yields in Spain (-6bps), Italy (-2bps) and Portugal (-2bps) fell to around 1.83%, 2.01% and 2.81% respectively.
Briefly back to the Oil theme, the effect of the recent slump continues to have a negative impact on the Russian Rouble. The currency was down as much as 6.6% yesterday versus the dollar before paring back some of those intra-day losses to close around 4.5% lower on the day (at 51.65). The currency has now declined 30% since the end of September. Russia’s 5yr CDS widened a further 26bps yesterday to 344bps whilst the 10y government bond yield finished 15bps higher at 10.76%. The moves also come on the back of an announcement by the Finance Minister Siluanov last week that capital flight may reach $130bn in 2014 - the most since 2009.
Switching focus to Asia, the Japan Topix is modestly stronger (+0.49%) and shrugging off Moody's sovereign rating cut yesterday (to A1/stable from Aa3). For the record, Japan's foreign currency rating is still AA-/Neg by S&P and A+/Neg by Fitch. The Moody's action comes just before Prime Minister Abe commences his campaign today ahead of the election later this month. Just on the subject, the Nikkei QUICK monthly bond survey yesterday showed that respondents saw a 79.9% probability that the LDP/Komeito ruling coalition would do better than its stated victory of 270 seats. Away from Japan, with the exception of Korea, major bourses are largely trading in the green. The Hang Seng (+0.74%), Shanghai Composite (+1.80%) and ASX 200 (+1.41%) are all trading firmer. On the latter, the RBA has kept its benchmark rate unchanged at 2.50% (as expected by most) overnight but it is worth noting that our Australian economist now expects a cumulative 50bps cut by the RBA in 2015 citing a forecasts of rising unemployment, nascent signs of moderation in house price growth and ongoing commodity price declines. This is a non-consensus call by DB so we'll see if the street follows from here.
Looking at today’s calendar, we’re fairly light on data prints today with just unemployment data in Spain to look forward to as well as PPI for the Euro-area. In the US this afternoon we’ve got the ISM NY due with the market expecting a slight uptick to 55.0 (from 54.8). Shortly after, we get the construction spending print which is expected to increase – residential construction in particular is expected to show a decent gain given the improvements in housing permits. We round today off with November vehicle sales data in the US. In terms of Fedspeak, early this afternoon both Fischer and Yellen will be talking in Washington so watch out headlines here.
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Let the good times roll. Equity valuations are really running on fundamentals and are no way driving by CB direct purchases.
https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1417522153563&chddm=239&chls=IntervalBasedLine&cmpto=NYSEARCA:SPY;INDEXCBOE:TYX;INDEXCBOE:TNX;NYSEARCA:JNK;NASDAQ:CU&cmptdms=0;1;1;0;0&q=NYSEARCA:USO&&fct=big&ei=uqt9VPOiBIaRsQfG1YCIBQ
Shirley you jest
Kinda like throwing spaghetti against the wall.....something has got to stick.
Russia is getting killed right now. Biggest decline in the Ruble since 1998.
http://www.planbeconomics.com/2014/12/russian-ruble-suffered-its-worst-o...
AGGGGHHHH!!!!
THROWING SPAGHETTI AGAINST A WALL!!?
WHAT A HORRIBLE THOUGHT!
HE BOILED FOR YOUR SINS!
REPENT! REPENT!
http://www.venganza.org/
WTF ?! How the hell do you come up with sites like these? Jesus, I really am out of touch with the world.
Half this place commutes from Jupiter, so where you from?
Can someone please explain why the Russian ruble tumbling is bad for Russia but the Yen tumbling is good for Japan (as far as the BOJ sees it).
One is USA's puppet, while the other challenge American hegemony...
Bankster (Nomatic Tribe that preys on economies) Hegemony
Russia is exporting resources, Japan manufactured goods.
Russia exporting resources means that the ruble value of their exports remains constant despite the fall in the prices of commodities. But another thing is that the Ruble has fallen much more than the yen.
I come from the worlds of hope and change.....I paid a drug mule $5000 to sneak me into America.
So when do I get my free heathcare again?
It's better than being broken in the head, a boil will heal, a head won't, take a look at yours.
And you're the best sofa king wheat odd here!
Congrats!
Arrggghhh is how you say it, dang it. The FSM allows for many faiths, however you should get the spelling right.
Don't believe everything you read on the web.
Nope. Not kidding. And don't call me Surely.
Barf!
Nope. Not kidding. And don't call me Surely.
Yeah! You can saay that again.
Barf!
Shirley contra first postings is a way of life.
Yawn.
Looking forward to YEN/USD hittting 150.
the day it hits 150 i will go take a drink with my friend chow lee chin
REF: Central Banking Control
They cannot take all of it over at once.
I spent a number of years in high-end banking security.
Whenever there was a merger, major downsizing, it took these guys a couple of years to line everything back up.
Some of what we are seeing is the personnel logistics in these institutions, which eat up time.
I think they best way they have figured out to to this is in chunks. Like in the idea the US will have an Amero Dollar and union financially with Mexico and Canada. Then, eventually a single SA union, then it joins the Amero, becoming the 'Samero, or Ameros."
As a US citizenism, I prefer to say "Sayonara" to that idea, but I think this is the scheme.
Just a thought.
While I do believe TPTB are trying to form an inter-state union, I believe, or feel, that Mexico will not be a part of that union. Yes, I think Canada and USA are already joined, in some creepy ways, (security state, for example), but I also feel that Mexico will simply have more in common with South America, not North America. Mexico would join a South American union due to greater cultural, political, and racial reasons, alignments. I simply feel Mexico has more in common with other Latin countries, than with us "gringos."
The yen has worked lower again sits near its recent lows. While the RSI is very low my experience has been this can go on for a long time and if panic sets in it will be followed by shock and awe. In the coming months the falling value of both the yen and euro may reek havoc through contagion. For months the major world currencies had traded in a narrow range allowing people to think we were on sound footing as central banks across the world continued to print and pump out money looking for 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. Because of weak demand for goods most of this freshly printed money has flowed 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
If I am not mistaken, that photo of Putin shows him crossing himself. And well he might. Oil prices ain't going too well and the ruble is taking a battering as well.
Then again, the whole world is on a slide and there will be no winners either because the whole system will collapse or because someone will get real trigger happy.
The great paradox of course is that the US dollar is riding the wave despite the wave being totally composed of sewage both politically and economically.
The Rotshcilds and Rockefellers seem to be at the desperation stage so maybe the pic of Putin is him reminding himself to stay patient and watch the criminal banking cabal self destruct...maybe he just remembered he should have bought more gold.
One way Russia could revalue the Ruble would be to announce you had enough Au- under international audit- to partially back the Rble with Au.
A delared percentage of your Rubles would give you an amount of Au with the Govt taking a tax.
But still, you could get and build a stash of PM with a direct bank conversion, even if your ruble was worth only 20% of the Au price that day.
That psudo casino is under investigation for not paying their taxes, I would not trust them or do business with them.
We have some Fed Speak today?
I would like to hear Janet Yellen ask "May I help You?"
The New Bolsheviks are looking more and more desperate.
They are getting their arses kicked in their Ukraine misadventure and need other methods to turn up the heat.
Time for Putin to buy out the limited supplies at the COMEX and put an end to this western bankster bolshevik cancer that is destroying the world for the benefit of the few.
I have the feeling that Putin is in a corner....Rotschilds won again....
In hindsight, look how easy it was to do. They MANIPULATE ALL MARKETS. Putin getting backed into a corner.
WW I I I ???????
People from Donetsk has filmed how Putin regime goons fires GRAD from residential area:
http://youtu.be/sdFAwJe53os
I suppose they have film of Putin regime goons also bringing down the Malaysian Airline flight and a soon to be released recording of the pilot's last words.
By the way, I don't see any damage being done to Ukranian residential areas. Just to those areas held by anti Kiev citizens.
Russian companies are clamoring for dollars to repay and refinance debt, adding to the relentless pressure on the crumbling ruble.
Debt repayments from companies and banks are light for now. But markets are anticipating the hump that comes in December, when around $34 billion in debt and interest repayments fall due, according to data from the central bank.
With sanctions in place, many firms are largely frozen out of international debt markets and unable to roll over that debt. That leaves them turning to the open market for dollars, jacking up the cost of buying them.
Mixed in with a sliding oil price, signs of Russian economic weakness, and persistent outflows of banking deposits, that keeps the ruble—already stuck at record lows—under heavy pressure.
“The pressure on the ruble is now coming from the corporate sector. Several Russian companies have a lot of maturities coming up and can’t roll this debt,” said Viktor Szabo, emerging-market investment manager at Aberdeen Asset Management, a company which manages £331.2 billion ($535.48 billion).
http://online.wsj.com/articles/russian-companies-clamor-for-dollars-to-r...
Russian companies will default on their debts. Problem solved, i.e. transferred to the creditors. They did it before. If they go tits up, the state should take over. When the game is rigged, you don't have to follow the rules... P.S. You're still an amateur troll...
CNBC website: "As ruble tumbles, what will Putin do next? Analysts are wondering what Russia’s “superhero” president will do next".
How about: Back the Ruble with Gold?
That could be fun to watch...
The Russian rouble is collapsing (again), falling over 8% in Monday trading before staging a modest rebound. And this is terrible news for Russian companies, which are due to make $35 billion of debt repayments in December.
The more the rouble falls, the harder it is for Russian businesses to pay their loans back.
At the time of writing, the currency had fallen to over 53 roubles to the dollar:
Below is Morgan Stanley's chart of the debt repayment schedule. As you can see, falls in the rouble over recent months have not been too much of a problem for Russian companies as debt repayments have been relatively modest.
That is now about to be tested as a $35 billion bill comes due this month. That's the equivalent of 1.9 trillion roubles:
Timothy Ash of Standard Bank says Russian corporates will be feeling the pinch:
"I guess the CBR thinks that with USD420bn in FX reserves, it has plenty of ammo still to deal with those after the event. FX debt liabilities are around USD680bn gross, of which around USD130-150bn fall due over the next year. I would think that many entities will be struggling with debt service costs on FX loans at these levels for the rouble."
Compounding the problem, the Russian central bank has limited currency "repo" operations — whereby Russian banks can access the central banks dollar reserves in exchange for collateral. This is widely seen as a response to the events of 2008, when Russian banks used cheap dollar liquidity provided by the central bank to short the rouble, compounding the currency's problems.
However, companies still have to find the money to fund the almost 1.9 trillion rouble bill (up from 1.6 trillion only a month ago) even with limited access to central bank funding. Perhaps this helps explain the announcement on Monday that the Russian government has decided to sell a 19.5% stake in the country's largest oil company, Rosneft.
The question now is at what price investors will be willing to take a risk on Russian firms — and how low the rouble can go.
http://finance.yahoo.com/news/rouble-collapsing-worst-possible-time-1707...
Bitch slapping Putin... anyone?
$35B is nothing for a 2.5T economy. Russia loses more than thag by dropping its wallet. Depreciation of Ruble hasnt hit domestic manufacturing market. It has hit the industries whom deal with importing. Sucks to be them. Russian economy in 1998 was $198B, which is nothing compared to today. GDP growth is forcasted at 0.4%. Pretty damn good for a nation with sanctions.
BTW, a smart man can figure out how many rubles they get at 50rub/usd vs before at current oil prices. Inflation is around 9%, which is nothing compared to the years India spent when the rupee dropped to 60/1usd. Last I checked, India still is around following their own policy.
Yeah but it's not a single wallet you can open and from what you can pay off your loan.
So what should one company do? Go to this "wallet" and say - please pay off my debt or I am doomed?
A company should default. If it doesn't have a positive cash flow, it has no real business anyway... What the West is doing is actually helping Putin by squeezing the Russian oligarchs, and forcing them to give up their fuck-you money, or ask Putin for help. Soon enough, Putin will have a firm control over the entire economy, the way the Chinese are doing it for over 25 years now. Go, back under your rock now and cry...
At least you are not hiding your collectivist agenda.
BS. There is more colectivism in modern America than in China. You're just too dumb to notice it...
Russia should exchange her USD reserve into phyzz XAU and then back up RUB with it --> instant market correction to 40:1.
Why not put the 20% rule in their constitution like Swiss tried to do ?
For the JPY, 130:1 at Chtrismas...
Hey Putin, keep buying gold!
http://www.cbc.ca/player/News/Business/ID/2623085441/
The Exchange with Amanda Lang | Dec 1, 2014 | 7:30
Crude and currency
Economist Jim Rickards weighs in on the impact of low oil prices on currencies
It's the "recovery" gone MIA...