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Euro, Crude Crash Resumes; US Stock Futures Slump On Grexit Fears; China Soars

Tyler Durden's picture




 

The new year is not even a week old and already the volatility fireworks are off, as well as the continued commodity derisking. But while for now US stocks continue to be an island oasis in a turbulent global sea where GDP forecasts decline every single day, the same can not be said about either the Euro, which after crashing overnight to a 9 year low, and rebounding briefly, has continued to decline and is now once again flirting with a key support level, this time 1.19, last reached during the May 2010 first Greek bailout. The catalyst, as usual, Greece which may or may not be leaving the Eurozone shortly, as well as ongoing bets on ECB QE following this morning's regional German inflation data which declined once more and now hints at outright deflation in Europe's strongest nation.

In any event, below 1.19 the freefall begins in earnest. As for Draghi's outright monetization of debt, even the FT now reports that "Economists sceptical ECB bond-buying would revive eurozone."

Speaking of freefall, things continue from bad to worse for Brent and WTI, which are both down 2% to fresh 5 years lows at last check, and Brent just hit $55 for the first time since May 2009. That this it taking place despite news that hours ago Saudi security personnel killed an alleged Jihadist gunman who blew himself up after being encircled near border post, shows just how substantial the downside momentum has become.

Meanwhile as the "developed" world is obsessing with Greece and Europe, where it "suddenly" realizes nothing has been fixed at all, China continues its relentless surge higher now that all chronic gamblers have left from Macau and rented out the UBS SHCOMP trading desk in Stamford, and as a result the Shanghai Composite Index surged once more, rising a whopping 3.6% to 3,350 in afternoon trading, led by industrials: the highest level since 2009. That this happens as copper falls for a third consecutive day, heading for its lowest closing price in more than 4 yrs, with NY copper down more than 1% to $2.7885 suggests that what a year ago was Chinese Bitcoin mania is now clearly raging in the stock market.

In Summary: European shares fall close to intraday lows with the oil & gas and basic resources sectors underperforming and health care, travel & leisure outperforming. Euro trades close to 9-year low against the dollar, crude oil falls to lowest since 2009. German govt spokesman says Germany wants to keep euro area together with Greece. The Italian and Spanish markets are the worst-performing larger bourses, the Swiss the best. German 10yr bond yields rise; Spanish yields increase. Commodities decline, with Brent crude, WTI crude underperforming and natural gas outperforming. U.S. ISM New York, vehicle sales, RBC consumer outlook due later.

Market Wrap

  • S&P 500 futures down 0.2% to 2041.9
  • Stoxx 600 down 0.3% to 340.2
  • US 10Yr yield up 2bps to 2.13%
  • German 10Yr yield up 2bps to 0.52%
  • MSCI Asia Pacific down 0.8% to 136.9
  • Gold spot up 0.1% to $1190.5/oz
  • Euro down 0.71% to $1.1917
  • Dollar Index up 0.59% to 91.62
  • Italian 10Yr yield up 5bps to 1.79%
  • Spanish 10Yr yield up 6bps to 1.56%
  • French 10Yr yield up 2bps to 0.8%
  • S&P GSCI Index down 0.6% to 412.3
  • Brent Futures down 1.8% to $55.4/bbl, WTI Futures down 1.7% to $51.8/bbl
  • LME 3m Copper down 1.1% to $6183.3/MT
  • LME 3m Nickel down 0% to $14827/MT
  • Wheat futures up 1.3% to 588.8 USd/bu

Fixed Income/ Equity market summary

Over the weekend European press paid attention to Draghi’s remarks in the Handelsblatt on Friday that the ECB was preparing “to alter the size, speed and composition of our measures at the beginning of 2015”. Dovish overtones were also seen from ECB’s Praet who acknowledged there is now an increased risk that the euro area could see “negative inflation during a substantial part of 2015”. Also dampening sentiment, according to unidentified sources German Chancellor Merkel’s administration sees a potential Greek exit from the Euro Area as manageable and the situation would be almost unavoidable if a Syrizan government failed to service Greece’s debt. Latest opinion polls suggest the Syriza party led the ruling conservatives by 3.1ppts, a slight narrowing from a 3.4 point lead in a previous poll last month. The GE/GR 10y bond spread is wider by 19.2bps and the Greek 10yr bond yield at 9.21%.

Both stories helped Bunds open near Friday’s highs and equities near Friday’s lows. However in thin liquidity as European traders slowly return to trade Bunds (-27 ticks) edged lower throughout the morning retracing the previous session’s gains on no new fundamental news, even given the backdrop of a fall in German state CPI’s. Equities have seen quite a large range on low volumes but trade lower across the board with the Eurostoxx50 -0.8%.

FX

During the Asian session EUR/USD took out USD 1bln of stops through 1.2000 taking it to a low of 1.1864 (lowest since March 2006) as expectations of further stimulus in the Eurozone continues to grow from recent ECB Draghi comments. This in turn has benefited the USD (+0.17%) which is now at its highest level since 2005, on safe haven flows, EUR weakness and monetary policy divergence, which is weighing on the major pairs. Of note, sources report that USD/JPY currently trades in close proximity to a large option expiry of USD 1.9bln at 120.50 which rolls off at the NYC cut.

Commodities

Precious metals have seen their earlier upside gains capped as the strong USD (+0.17%) has weigh on precious and base metals. The strong USD has also kept WTI (-0.88) in negative territory now trading near 5 and a half year lows. However, Nat Gas (+3.6%) continues to reside in positive territory after bad weather in the Midwest and East coast of the US.

Bulletin headline summary from Bloomberg and RanSquawk

  • USD, the reserve currency of choice, continues to trend higher now at its best levels since 2005
  • Grexit fears continue to linger as German sources suggest a Greek exit would be manageable and unavoidable under a Syrizan Govt.
  • Treasuries fall, led by 2Y and 3Y notes, to begin the first full week of 2015; minutes of Fed’s Dec. meeting and EU inflation data due Wednesday, with nonfarm payrolls scheduled for Friday.
  • Greece’s political parties embarked on a flash campaign for elections in less than three weeks that Prime Minister Samaras said will determine the fate of the country’s membership in the euro currency area
  • Germany’s Merkel and FinMin Schaeuble consider a Greek exit from the euro area to be manageable because of progress made since height of sovereign debt crisis in  2012, Der Spiegel reports in e-mailed summary an article, citing unidentified people close to govt
  • Merkel’s government continues to support Greece as part of stabilizing euro area, government spokesman Steffen Seibert says in Berlin; Germany hasn’t changed its policy on Greece in the euro area, Seibert says
  • Euro zone consumer prices probably fell 0.1% in Dec., according to the median estimate in a Bloomberg survey; the data, due Jan. 7, may tip scales in favor of sovereign QE when Draghi leads a ECB meeting later this month
  • Oil fell for a third day, extending its drop from the lowest close since 2009, as record supplies from Iraq and Russia bolstered speculation that a global glut that drove crude into a bear market will persist
  • The world’s biggest economies will need to refinance about $6.96t of bills, notes and bonds this year, 6.3% less than last year, as austerity measures help shrink budget deficits
  • Nearly $1.4t IG priced last year, $305b high yield. BofAML Corporate Master Index OAS at 145, opened 2014 at 127; year range 151/106. High Yield Master II OAS at 508, opened 2014 at 400; year range 571/335
  • Sovereign yields mostly higher. Asian and European stocks mostly lower; Shanghai +3.6%. U.S. equity-index futures decline. Brent crude, WTI and copper fall; gold gains
  • Looking ahead the calendar is light with Fed’s Williams and German CPI due at 1300GMT

US Event Calendar

  • 7:30am: RBC Consumer Outlook Index, Jan. (prior 53.3)
  • 9:45am: ISM New York, Dec. (prior 62.4)
  • Wards Domestic Vehicle Sales, Dec., est. 13.70m (prior 13.78m); Wards Total Vehicle Sales, Dec., est. 16.90m (prior 17.08m)
 

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Mon, 01/05/2015 - 08:04 | 5622965 Bearwagon
Bearwagon's picture

This can only be BULLISH, right? Right!

Mon, 01/05/2015 - 08:12 | 5622973 Headbanger
Headbanger's picture

And don't forget .. THE POLAR VORTEX FROM HELL IS COMING!!

But maybe it will cause some global warming libturds to get eaten by marauding polar bears, eh!

http://www.cbc.ca/news/canada/newfoundland-labrador/marauding-polar-bear...

Mon, 01/05/2015 - 08:23 | 5622993 Haus-Targaryen
Haus-Targaryen's picture

Good.  Death to the EUR. 

Mon, 01/05/2015 - 08:29 | 5623002 negative rates
negative rates's picture

The EUR is dead, long live the EUR.

Mon, 01/05/2015 - 08:34 | 5623010 Haus-Targaryen
Haus-Targaryen's picture

I think the EUR is on life-support at the moment via jaw-boning.  

Mon, 01/05/2015 - 08:53 | 5623023 stocktivity
stocktivity's picture

This "Polar Vortex" thing is way overdone.  It's winter for crying out loud. It gets cold in January. 

Mon, 01/05/2015 - 09:08 | 5623043 Beowulf55
Beowulf55's picture

And don't forget .. THE POLAR VORTEX FROM HELL IS COMING!!

 

Oh please......it's fucking winter........

Mon, 01/05/2015 - 08:06 | 5622969 GetZeeGold
GetZeeGold's picture

 

 

 

Crude Crash Resumes

 

The Flux Capacitor....is fluxing nicely. Gotta love it when a plan comes together.

Mon, 01/05/2015 - 08:05 | 5622972 ciscokid
ciscokid's picture

Buy physical gold....

Mon, 01/05/2015 - 08:09 | 5622975 GetZeeGold
GetZeeGold's picture

 

 

I was thinking about getting into oil derivatives myself.....are you thinking maybe I should hold off?

Mon, 01/05/2015 - 08:19 | 5622987 medium giraffe
medium giraffe's picture

Depends, if by oil derivatives you mean petroleum jelly it might be an idea to stock up - 2015 already looking like we are in for a reaming like no reaming has reamed before.  Crappy new year!

Mon, 01/05/2015 - 08:18 | 5622988 Headbanger
Headbanger's picture

Buy physical lead!

Cause it's a LOT less expensive than shooting gold bullets.

Mon, 01/05/2015 - 09:48 | 5623165 HowdyDoody
HowdyDoody's picture

I understand silver bullets are needed for banksters.

Mon, 01/05/2015 - 08:22 | 5622991 NubianSundance
NubianSundance's picture

Oil may go down to $40 or even less, so there may be a ways to go with this bear, but it's your decision! PS there may be a temporary spike up to 70 in between so exercise caution!

Mon, 01/05/2015 - 08:24 | 5622995 GetZeeGold
GetZeeGold's picture

 

 

Sooo.....do you also think it's possible Russia is selling it's gold?

Mon, 01/05/2015 - 08:32 | 5623007 negative rates
negative rates's picture

Only if that would trigger a derivative collapse and market raised rates. So prolly not.

Mon, 01/05/2015 - 08:25 | 5622994 Bearwagon
Bearwagon's picture

Order as much heating oil as you can get. Wait. Profit ....

Mon, 01/05/2015 - 08:13 | 5622982 Peter Pan
Peter Pan's picture

You can't buy money. What you are actually doing is trading in currency for money.

Mon, 01/05/2015 - 08:12 | 5622980 Peter Pan
Peter Pan's picture

Just another day where the world continues to limp and the limp will not abate until the politicians cease to stretch the truth on their rack of lies.

Mon, 01/05/2015 - 08:43 | 5623013 Winston Churchill
Winston Churchill's picture

Just wait until it goes lame, call the knackers,and its glue for everyone.

Mon, 01/05/2015 - 08:16 | 5622984 Brazen Heist
Brazen Heist's picture

Bar a Chinese bailout, Venezuela is on the verge of collapse, the first domino to go down in 2015 from the oil price crash.

Then there is the Greek election coming up. Watch the sociopaths in Brussels pull off a "do whatever it takes" to keep their little cult together.

Mon, 01/05/2015 - 08:18 | 5622986 GetZeeGold
GetZeeGold's picture

 

 

Not to worry....sweet socialism will pull them out of their funk.

Mon, 01/05/2015 - 08:22 | 5622992 Brazen Heist
Brazen Heist's picture

A proper default will be the first step. They can choose whatever system they want after that.

If Brussels does choose to throw Greece to the wolves out of the EU, it will only be an opportunity for Russia and CHina to step in and offer support to Greece.

How much worse can it get anyway for Greece?

Mon, 01/05/2015 - 08:35 | 5623009 negative rates
negative rates's picture

No they can't, if their currency is backed by oil, and oil is cheap going forward, they can't simply create money and be taken seriously, depression bitches.

Mon, 01/05/2015 - 10:46 | 5623427 Escapedgoat
Escapedgoat's picture

Olive Oil.

If Greece stops their olive oil, then the Italians and the Spaniards are going to raise their prices to at least $10.00 per litre at least, at producers level and no doubt it will be $20.00 retail.

The alternative is to use Saoudi Light Crude for your salad and cooking.

Mon, 01/05/2015 - 08:30 | 5623003 Ribeye
Ribeye's picture

And then the UK elections with the now almost certain surge of UKIP, 

also, keep an eye out for a snap election in Ireland, Which I think may happen, and will lead to a historic shift in the political landscape, given recent poll results...

Sadly, this will be a shift towards the far left, however, it will mean more headaches for the EU, which is at least a silver lining,

 

 

Mon, 01/05/2015 - 09:51 | 5623178 HowdyDoody
HowdyDoody's picture

Do you mean to say that you consider UKIP far left?

Mon, 01/05/2015 - 08:30 | 5623005 Peter Pan
Peter Pan's picture

Then there is the Greek election coming up. Watch the sociopaths in Brussels pull off a "do whatever it takes" to keep their little cult together.

Most cults are kept together by fear or force.

Mon, 01/05/2015 - 09:52 | 5623187 HowdyDoody
HowdyDoody's picture

Bought and paid for by the banksters. Look where all the GS alumni have infiltrated the EU.

Mon, 01/05/2015 - 10:46 | 5623426 Redneck Hippy
Redneck Hippy's picture

If China bails out Venezuela, who will bail out China?

Mon, 01/05/2015 - 08:27 | 5622998 GetZeeGold
GetZeeGold's picture

 

 

Thanks for the obfuscation......we needed that.

Mon, 01/05/2015 - 10:51 | 5623447 Redneck Hippy
Redneck Hippy's picture

1964?  

Mon, 01/05/2015 - 08:28 | 5623001 Spungo
Spungo's picture

Of course Russia is selling gold. That's what you're supposed to do when your currency collapses - you buy it back to soak up the extra supply. When your currency is strong, use it to buy reserves. When the currency struggles, you sell reserves and raise interest rates to stabilize the currency.

Mon, 01/05/2015 - 08:32 | 5623004 NubianSundance
NubianSundance's picture

Disagree. If you are stockpiling gold to prepare gold backed trade loc's etc you don't want to sell gold.

Mon, 01/05/2015 - 08:33 | 5623006 GetZeeGold
GetZeeGold's picture

 

 

That's what you're supposed to do when your currency collapses

 

I'll bet the Russians are glad you're not working for them.

 

The Russians have reserves.......the US doesn't.

 

Here's the deal.....when you've got gold......you're done.

Mon, 01/05/2015 - 11:23 | 5623608 escapeefromOZ
escapeefromOZ's picture

In November Russia Bought 18 tons of gold  . Where does your info about Russia selling gold come from ? 

Tue, 01/06/2015 - 03:40 | 5627038 Rabbitnexus
Rabbitnexus's picture

No, that is what the idiots in Washington hoped would happen but the Russians are buying gold in fact. They have bought more than half the 92 tons physical sold in the last quarter, a full 55 tons and they are in effect only taking gold for their oil. If they get other currencies, especially US dollars they exchange it for gold every time. This is check-mate for the idiots running the USA.

Mon, 01/05/2015 - 08:33 | 5623008 corbeau
corbeau's picture

".. US stocks continue to be an island oasis.."

Yeah, thin air oasis. "Smoke on the water" as Deep Purple told us long ago...

Mon, 01/05/2015 - 08:36 | 5623011 Iocosus
Iocosus's picture

Can someone please explain why Spanish and Italian 10yr yields are lower than treasuries?

Mon, 01/05/2015 - 08:47 | 5623017 quasimodo
quasimodo's picture

They suck even moar?

 

Mon, 01/05/2015 - 09:25 | 5623084 TeethVillage88s
TeethVillage88s's picture

2011 story about Italian 10 Year Bond Rates Reaching Record High.

"Most economists do not expect Italy to plead for a bailout yet. Instead, they say they think the higher rates will force the European Central Bank or other European neighbors to intervene more forcefully with measures to push down rates."

http://www.nytimes.com/2011/11/08/business/global/italy-bonds-push-highe...

Who else could buy Italian Bonds? I'm thinking must be Central Bank??

Mon, 01/05/2015 - 09:33 | 5623115 TeethVillage88s
TeethVillage88s's picture

Could be Strategic move by ECB due to the many risks of having 5 nations, PIIGS, with high Interest Rates, High Debt, with Geopolitical problems and Recession/Depression Global Risk.

- War with Russia
- Financial War between USA & Russia
- Global War on Terror, IS, ISIS
- High Debt, Cheap Money in USA, Money Printing Moral Hazard in USA, Risk to Petro Dollar
- Risk of China Collapse
- China buying Gold on the Black Market (Hidden)
- Risk of Move to SDR, Special Drawing Rights

http://www.businessweek.com/news/2014-12-30/italian-bonds-rise-before-de...

“The auctions clearly were very strong and they were particularly strong given the background of Greece and possible risk aversion,” SocGen’s O’Hagan said. “The ECB is certainly helping, but it’s also because the nature of the Greek problem has changed.”

Mon, 01/05/2015 - 08:37 | 5623012 F em all but 6
F em all but 6's picture

You gotta love the latest economic theory. Drive commodities below the cost of production. Run the producers out of business. Bankruptsy, eventual shortages. Shit, we may find it necessary to petition our glorious leaders to institute price controls.

Mon, 01/05/2015 - 09:17 | 5623018 TeethVillage88s
TeethVillage88s's picture

I'm getting worked up into a ZH Lather. FED Cheap Money will always lead to Credit Extended to Weak Business Plans, Credit Linkages Increase, those Links trigger domino effect... there is plenty of reason to believe history will repeat itself here. Cheap Money in Fixed-Manipulated-Market Rates will lead to bubble & Collapse. Jim Rickards says we are looking at $100 Trillion Dollar Collapse. And we know there are $1.7 Quadrillion in Derivatives Globally.

Quote:

#2 John Ficenec: “In the US, Professor Robert Shiller’s cyclically adjusted price earnings ratio – or Shiller CAPE – for the S&P 500 is currently at 27.2, some 64pc above the historic average of 16.6. On only three occasions since 1882 has it been higher – in 1929, 2000 and 2007.”

#3 Ambrose Evans-Pritchard, one of the most respected economic journalists on the entire planet: “The eurozone will be in deflation by February, forlornly trying to ignite its damp wood by rubbing stones. Real interest rates will ratchet higher. The debt load will continue to rise at a faster pace than nominal GDP across Club Med. The region will sink deeper into a compound interest trap.”

Late Add article by Finecec:

http://www.telegraph.co.uk/finance/economics/11322623/Ten-warning-signs-...

Mon, 01/05/2015 - 10:07 | 5623263 falak pema
falak pema's picture

If you have the lather you'll need a very close shave! 

Mon, 01/05/2015 - 08:57 | 5623030 crazytechnician
crazytechnician's picture

The Cock Market is up, it's gonna blow !

Mon, 01/05/2015 - 09:01 | 5623033 bigkahuna
bigkahuna's picture

I remember this story from a couple a three years ago. I wonder if it will turn out the same way as last time. LOL! Oh, hello everyone. Be back soon and happy new year!

Mon, 01/05/2015 - 09:16 | 5623049 freedom123
freedom123's picture
Ruble Starts New Year With Plunge as Oil Declines to 2009 Low

http://www.bloomberg.com/news/2015-01-05/ruble-starts-new-year-with-plun...

 

Inside Putin’s Information War

At one end of the table sat one of the country’s most famous political TV presenters. He was small and spoke fast, with a smoky voice: “We all know there will be no real politics,” he said. “But we still have to give our viewers the sense something is happening. They need to be kept entertained.”

“So what should we play with?” he asked. “Shall we attack oligarchs? Who’s the enemy this week? Politics has got to feel like a movie!”

More than a decade later, that movie is increasingly dark and disturbing. The first thing Russian militias do when they take a town in East Ukraine is seize the television towers and switch them over to Kremlin channels. Soon after, the locals begin to rant about fascists in Kyiv and dark U.S. plots to purge Russian speakers from East Ukraine. It’s not just what they say but how they say it that is so disturbing: irrational spirals of paranoia, theories so elaborate and illogical one can’t possibly argue with them.

This is even before the bombs start falling on them: “Information war is now the main type of war,” says the Kremlin’s chief propagandist Dmitry Kieselev, “preparing the way for military action.” And Putin’s Russia is very good at it, having combined the dirtiest mechanisms of PR, brainwashing techniques pioneered in cults and a rich KGB tradition of psy-ops into a sort of television Frankenstein with which it controls its own population, conquers neighboring countries and attacks the West. 

It poses new dangers. And I know, because I saw it grow.

Read more: http://www.politico.com/magazine/story/2015/01/putin-russia-tv-113960.html#ixzz3Nx7SDvmi
Tue, 01/06/2015 - 03:44 | 5627041 Rabbitnexus
Rabbitnexus's picture

Ridiculous wanker.

Mon, 01/05/2015 - 09:24 | 5623086 q99x2
q99x2's picture

I wonder if Greece is going to default.

Mon, 01/05/2015 - 11:01 | 5623494 Escapedgoat
Escapedgoat's picture

In reality, it already is Bankrupt, it is just the Banksters that are not officially anouncing it, because otherwise they have to pay out the CDS.

Mon, 01/05/2015 - 09:50 | 5623183 Dead Canary
Dead Canary's picture

But....but..... PROMISE ZONES!

Tell me. When does that start to kick in? I'm still waiting.

Mon, 01/05/2015 - 10:27 | 5623349 jubber
jubber's picture

Are Morgan Stanley the bagholders again anyone know?

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