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Futures Up In Light Volume On Renewed ECB QE Hopes As Crude Slides Again
While the last trading day of 2014 will be important if only to see if Dow 18,000 can be recaptured on what is sure to be the lowest volume in years, don't expect much help from Brent which continues to slide and was down nearly 3% at $56.20 or WTI which is also flirting with the $53 level, down almost 2% overnight both set to cap the worst year for the commodity since 2008. Not much should be expected from Treasuries either, set to return over 6% in 2014 - the best performance since 2011 - crushing the latest hoard of bond shorts all of which got the Treasury move in 2014 epically wrong, which will close early at 2 pm. Which means that the HFT algos will once again be driven off the illiquid USDJPY correlation, where low volume will mean 5-10 pip moves today should be the norm, as well as European stocks, whose Stoxx Europe 600 Index rose 0.3% earlier on the latest round of jawboning by an ECB member, this time Dutchman Peter Praet, who said in an interview with German newspaper Boersen-Zeitung that lower oil prices increasingly risk de-anchoring inflation expectations, indicating that quantitative easing is becoming more likely.
In other words, the great crude crash, while completely ignored by the Fed may just be the scapegoat that launches European QE despite Germany once again opposing QE, when Merkel's chief economic advisor Christoph Schmidt said he sees no need for ECB to buy sovereign bonds at this moment.
For now, however, the algos have latched on to the hope of ECB coming once again to the rescue even if the sudden political seachange in Greece has made outright QE increasingly more improbable, and with Draghi once again bringing up not only the bitter topic of a "complete monetary union" but also a "capital markets union", it appears that Europe is once again stuck in that place where it found itself in 2011 and 2012 where in order for the ECB to continue printing money, peripheral nations need to prepare to hand over more sovereignty to the northern states. Considering the latest bout of nationalism and pro-independence moves across Europe, this could hardly have come at a worse time.
Keep an eye on the 11:30 am Eastern ramp today to see if math PhDs again forgot to adjust their intraday ramp clocks because unlike the regular US day session, trading on the London Stock Exchange will end at 12:30 p.m. local time, and NYSE Euronext’s European cash markets will close 35 minutes later. The Madrid bourse will stop trading at 2 p.m. local time. Exchanges in Germany, Switzerland, Italy and the Nordic countries are closed. This doesn't mean, however that the pre-programmed US market algo ramp which takes place both before the normal European and US closes, won't take place just as scheduled.
Mainland Chinese stocks topped off the year in style, surging 2.2% to 3234.68, soaring 53% despite the final December Manufacturing PMI - printing at 49.6, the first contraction since April - showing China's economy is slowing down to a pace not seen in recent history. Or rather, soaring due to the the economic slow down, which like in the West is taken as a sign of more central bank easing on deck. Meanwhile, as the WSJ notes, in Hong Kong, the Hang Seng Index rose 0.4%, to 23605.04, gaining only 1.3% for the year, significantly underperforming its mainland counterpart. Chinese firms listed offshore have been more susceptible to concerns about slowing economic growth, and the Hang Seng Index is driven less by retail investors than by institutional investors. Buying by local Chinese retail investors has provided a major boost to volumes and gains in Shanghai this year. For a good explanation of the unprecedented stock bubble mania that has gripped China read Seeking to Ride on China’s Stock Market Highs.
Finally, before we move on, it is worth noting that Saudi Arabia's stock market, tumbled earlier today after news that Saudi's aged and frail King Abdullah was admitted to hospital for medical checks. We will have more to say about this shortly.
In summary:
- Treasuries gain on the last trading day of 2014, led by 7Y and 10Y ; volumes expected to be light as futures trading closes at 1pm ET, cash at 2pm ET.
- A China factory gauge sank to a seven-month low in December, with HSBC/Markit’s PMI falling to 49.6 from 50 in Nov. and preliminary reading of 49.5
- ECB’s Peter Praet warned in an interview with German newspaper Boersen-Zeitung that lower oil prices increasingly risk de-anchoring inflation expectations, indicating that QE is becoming more likely
- Christoph Schmidt, head of Merkel’s council of independent economic advisers, says in Die Welt interview that he sees no need for ECB to buy sovereigns after bank already committed to other asset purchases and cheap refinancing operations
- Merkel stepped up her criticism of anti-Islamist demonstrations across Germany, saying refugees have the same aspirations as the citizens of her former communist East German homeland
- Greek polling data suggest neither Prime Minister Samaras’s New Democracy nor the main opposition Syriza party will win an outright majority in next month’s election, meaning coalition negotiations or even a repeat vote will be needed
- The number of Americans dying from influenza and pneumonia has hit epidemic levels this winter as the nation faces the second-highest influenza rates since swine flu swept the country in 2009
- Treasuries are on track to return about 6% in 2014, best performance, since 2011, led by double-digit gains for 10Y and 30Y sectors, according to BofAML indexes; 10Y yields began the year at 2.989%, 30Y at 3.922%
- Curve flattening drove UST performance this year: while Fed policy evolution pushed 2Y and 3Y yields to highest levels since 2011, long yields declined as weak European economy and plunging oil price during 2H reduced inflation expectations globally, pushing core eurozone 10Y yields to record lows
- Sovereign yields mostly higher. Asian and European stocks mixed, U.S. equity-index futures gain. Brent crude, gold and copper fall
Economic Data
- 8:30am: Initial Jobless Claims, Dec. 27, est. 290k (prior 280k)
- Continuing Claims, Dec. 20, est. 2.368k (prior 2.403k)
- 9:45am: Chicago Purchasing Manager, Dec., est. 60 (prior 60.8)
- 9:45am: Bloomberg Consumer Comfort, Dec. 28
- 10:00am: Pending Home Sales m/m, Nov., est. 0.5% (prior -1.1%)
- Pending Home Sales y/y, Nov., est. 3.6% (prior 2.2%)
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Yeah but USDJPY heading down:
http://www.marketwatch.com/investing/Currency/USDJPY/charts
And crude imploding moar:
http://www.marketwatch.com/investing/Future/BRENT%20CRUDE/charts?Country...
And crude imploding moar
Gotta love it when a plan comes together...
So what is the plan then ?
And, maybe you know, what will be the effect of much lower oil prices on US inflation ?
This might seem simple, deflationary you will think, but we are talking about lower demand for petrodollars and thus a downward pressure on the value of the dollar and hence increased costs of imports ( which might in itself be offset by lower transport costs ), for a country with huge trade deficits.
So possibly, all in all, inflation neutral ? ( the outcome they aimed for ? )
Something I cannot get my head around. :-(
ruble smackdown. christmas came late.
It's possible they could be selling their gold......but I doubt it.
It's all Bullshit!!! I'd expect Draghi to "speak" of easing by Monday morning's U.S. market open. After all, we must get 2015 off to a positive start.
ECB will wait until the Greek snap election.... they always are a day late and a dollar short.
Debt is Slavery.....
https://www.youtube.com/watch?v=V0GDcA-gqY4
The whole UK economy has been protected since 2008 and EU contagion by are North Sea Oil assets, although dwindling, with Brent crashing I would have thought some of our overseas holders of Gilts may be getting a little worried...also our insolvent Banks have a shed load of Oil loans and derivatives that must be looking rather alarming, with the biggest debt of anyone in Europe I would have thought Alarm Bells must be ringing in the Treasury....
Last day of Circus 2014
ECB will be used as a tool to drive Europe into the desirable federalization with the characteristics of an empire, rather than of a democratic federation. Scenario 3 will be probably the most suitable for the "emperor" Draghi to proceed towards this direction, as he has already the control inside eurozone through a decision taken more than two years ago:
cool. except that there is a further option to democratic federation or empire or break up. one that most in the English speaking world don't even see, even though it's in plain view
that of a confederation of sovereign nations, with a few shared orgs as common facilities like a common currency or a common regulatory environment for trade
which is the simplest way to sum up the real, existing condition, as spelled out in all the treaties. and the one we want to keep, thank you very much
Current leadership clowns of the eurozone are good only for one thing: Serving lobbyists and plutocrats.
Peter Praet is the Belgian representatieve in the ECB board. The dutch representatieve is Klaas knot, who supposedly is weidmann' s puppet. Legt his master out to dry on Some occasions, though.
Peter Praet will no doubt be very supportive for the Franco-italian axis as Belgium is a dead man walking...
you are repeating a very British view on the matter which is quite... inconclusive. the "Franco-Italian axis" sounds so deliciously WWII/fascist, and "Weidmann's puppet" so deliciously conspirative
don't be afraid, spell it out: do you see Italy and France really breaking out of the Fiscal Compact? or asking for a total QE against the ruling treaties?
tell me which treaties all those continentals plan to break, in your opinion
I think the European Court of Justice will determine whether any laws would/will be broken by a QE program of the ECB.
piratepiet, for you I reccomend the excellent article written by my "EUR-nemesis" Mr. Wolfgang Münchau in the "Comment" section of the Financial Times, on Dec. 28, 2014 (link/needs subscription)
he deliciously takes apart what the ECB really means when they are talking about the possible QE or the banking union
I wish I would have written that article, though I'd be gloating where he shakes his head and shake my head where he is spelling doom for this EUR that simply "can't work, because"
thx for the link. I will have a look later.
ecb QE will not come soon.
it is unique golden card in the set, allowing an extend of many thing for years.
but it also sign the last card worth to be played.
germany know this i think.
sure. I bet you did not notice the ECB doing the exact opposite of QE for two years, in the tune of one cool trillion. don't worry, nearly nobody did, and even ZH prefers to skip the matter, since it does not fit the usual, simplified narrative
EDIT: I owe you an apology, I did not notice your "not". please pardon my haste and sarcasm, I think this is the second time I did that to you this month
Not True at all , ECB have been doing most of it in behind the scenes and i can prove it to you if you need more info
The days of "MOAR" are numbered
It's a big club and you ain't in it BITCHEZ
"i can prve it to you if you need more info"
I take your word for it :-)
well, I'd be delighted if you can show me whatever evidence you have. the ECB or it's member national banks, btw? there is a difference, you see?
You want proof , here is your proof:
2011:long term Refinancing Operation (LTRO) that had been estimated to provide upto Euro 350 billion to Europe's bankrupt banks in the form of cheap 1% 3 year loans, instead a huge Euro 489 billion was borrowed by 523 banks in a rush to grab cheap money that amounts to QE in all but name regardless of ECB propaganda.
Let me again explain more precisely what happened The ECB is not allowed to buy PIIGS government bonds, so ECB lends banks Euro 489 billion at 1% that put up PIIGS debt as collateral (which means they cannot sell it), so that they hopefully go and buy more PIIGS debt that pay 5%+, this is exactly the same objective of UK and US Q.E. to monetize their own debt. Though it has the same flaws in that they cannot tell the banks what to do with the money (but governments do bully their banks) so probably less than 1/3rd will be used to buy non german sovereign debt.
excellent, but how is this... "behind the scenes"? note that LTROs need... quality collateral. further, note that LTROs have to be paid... back
and in fact one trillion has already been paid back
further, note that the whole financial world was completely flabbergasted and is still mad at the ECB that it used LTROs instead of a "straight" QE
never claimed the ECB would not provide an elastic response to monetary and banking system issues
who is the victim, in this? those who shorted european sovereign bonds?
the answer to that was provided by no other than Tyler , here is the post:
http://www.zerohedge.com/news/visualizing-why-ltro-qe
Quantitative Easing (QE) is/was seemingly a magic remedy, at least in the short-term. As GLG's Pierre Lagrange notes, central bankers can conjure up money out of thin air and use it to purchase assets - transforming transferring toxic debt, stimulating demand for risk assets, devaluing currencies (this deflating debt), and maintaining low interest rates on govvies. The ECB's more restrictive mandate, however, does not allow them to print money for any other purpose than lending and so direct QE was out of the question and so, as the chart below demonstrates, they ingeniously created the LTRO - delivering an infusion of liquidity (potential profits from carry and hope for capital raises).
Of course we now know that the encumbrance issues and banks' lackadaisical attitude to raising capital has left many on a worse situation (far worse than if 'traditional' QE was employed) as financials and sovereigns are even more contagiously integrated, collateral has been whisked away from a desperate market, and the short-term benefits never flowed to the real economy (gummed up in the lack of transmission from bank reserves). Theoretically, there are few limits to what the ECB can do, and it seems the market is once again testing the politicians' and central bankers' resolves as we head into a summer dominated by distractions like the Olympics - increasing the chance of risk flares on low liquidity.
ah, wonderful, something I can completely disagree with:
"For now, however, the algos have latched on to the hope of ECB coming once again to the rescue even if the sudden political seachange in Greece has made outright QE increasingly more improbable, and with Draghi once again bringing up not only the bitter topic of a "complete monetary union" but also a "capital markets union", it appears that Europe is once again stuck in that place where it found itself in 2011 and 2012 where in order for the ECB to continue printing money, peripheral nations need to prepare to hand over more sovereignty to the northern states. Considering the latest bout of nationalism and pro-independence moves across Europe, this could hardly have come at a worse time. "
- the ECB does not need to print. it just needs to keep the financialists off it's back by looking as if it will print. whatever it takes to talk that EURUSD down... included
- the only parties that would love to see the peripheral eurozone nations to hand over more sovereignty is not the northern states, it's the same financialists in NY's Wall Street and London's City
as it was when they asked for EuroBonds, ECB QE, etc. etc.
ChinaA50 up over 4000 points >50% since 20th Nov WOW is that the biggest move ever?
About 49 minutes into Craig Hulet's link below you can hear how the bankers are preparing to fry the US population if they riot when they come to take your pension funds. Actually fry with microwave tech.
http://www.eliasound.biz/hulet/mp3s/2014/12.16.14.mp3
I have a simple MSG to ZH Nation
HAPPY NEW YEAR
The days of "MOAR" are numbered
It's a big club and you ain't in it BITCHEZ
There will be some Super Unicorn Skittle Shitting Rainbow FairyDust shennanigans going on behind the scenes.....expect the last day of The Year of the Unicorn to go out with corks popping in everone's ass. Happy Fucking New Year fellow ZHers.....you think 2014 was Awesome....just wait....2015 will AMAZE!
Well thats it then, the last day of 2014 and the shit didnt hit the fan??
The next twelve months should be interesting folks, so I wish you all a peaceful and prosperous coming 2015.
Doesnt even matter if we vehemently disagree with each other, if anyone deserves the best of luck, you lot do.
Happy New Year Bitchez
96
the crude slide has put billions back into the economyand not even a blip on the radar as it picks up. Should tell you how fucked we are..
'As the NWO slips, slides, away... on a 'beggard-thy[kingdom cum?]-neighbor': : a camel-nose `Hors d'oeuvre`delicacy,...[?] marinated in the finest brent, that only a american sheikh could stomach, is hustled inside on the torso?lete of a topless[?] belly dancer appetizer?!?'
and now the European Union 'Colonialization' is complete!
It's a 'Smorgasboard? that only a Camel Jo?key could appreciate with the TRIBE?
from here to eternity,....
http://en.wikipedia.org/wiki/European_Economic_Community
http://en.wikipedia.org/wiki/History_of_the_European_Union#1993.E2.80.932004:_Creation
http://en.wikipedia.org/wiki/Timeline_of_European_Union_history
Happy entrails/stuffing New Years to awe....
On the last day of 2008, $USO (crude oil ETF) staged one of the biggest open-to-close gains in its history
just repeating