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Market Wrap: "It's Turmoil" - Overnight Gains Wiped Out, Futures Trade Below 2000 On SNB "Shock And Awe"
To paraphrase a trader who walked into the biggest FX clusterfuck in years, "it's total, unprecedented market turmoil." So while the world gets a grip on what today's historic move by the SNB means, which judging by the record 13% collapse in the Swiss Stock Market shows clearly that the SNB market put is dead and the SNB may be the first central-banking hedge fund which just folded (we can't wait to see what the SNB P&L losses on its EURCHF holdings will be), here is what has happened so far for anyone unlucky enough to be walking into the carnage some 2 hours late.
Session highlights courtesy of RanSquawk
- SNB surprise the market by calling an end to their minimum exchange rate and lower their interest rate to -0.75%
- Initial reaction EUR/CHF briefly fell ~35 points (30%) while USD/CHF dropped its most since 1971. In sympathy EUR/USD printed an 11yr low at 1.1580 and the SMI remains down ~9% for the session
- Looking forward SNB’s Jordan is due to hold a press conference to explain today’s decision at 1215GMT/0615CST. Major data from the States come in the form of Empire manufacturing, PPI, Philly Fed, EIA nat gas storage change as well as earnings from the likes of Citigroup, Bank of America and Intel.
**SNB DROPS CHF FLOOR AND CUT RATES**
The trading day was off to a quiet start ahead of US data and earnings later today when the SNB decided to drop the bombshell. In a surprise and unscheduled announcement the SNB called an end to their minimum exchange rate and lowered their interest rate to -0.75%, concluding that the CHF cap was no longer justified. In an initial reaction EUR/CHF dropped like a stone with USD/CHF marking its biggest fall since 1971, while EUR/USD printed an 11yr low at 1.1580. From a stock perspective the SMI fell 8% as the strength in the local currency is likely to impact negatively corporate profits as well as the Swiss economy itself which has already been battling a currency that was too strong even when the floor was in place. The move has also resulted in weakness in the HUF and PLN as both have relatively large loan exposure to Switzerland. Once the dust settled European stock futures bounced off the lows as EUR/CHF pared approximately half of the initial 30% move lower in the cross now trading around 1.05. This also came amid unconfirmed market talk that the SNB were back into the market helping prop up the currency from its lowest level.
Looking ahead we will see how the US interpret the news especially given the timing as we head closer towards the scheduled ECB rate decision due on the 22nd of January where it is broadly expected that the ECB will announce QE. Snap analysis from some banks suggests that the SNB may well have taken pre-emptive action ahead of anticipated ECB action by scrapping the floor as the cost would have been amplified by the drop in the EUR allied to cutting rates in order to deter market participants from parking their cash at the Swiss central bank.
FIXED INCOME/EQUITIES
The European curve is seen flatter this morning as a result of the surprise announcement from the SNB which is likely to further fuel the flames of ECB QE at the looming meeting next Thursday (22nd). Bund futures spiked higher on the release of the Swiss news tripping stops on the rise to further exacerbate the gains with the German 10yr yield now at 0.472%. In equity market the SMI is the standout trading down in excess of 9% as fears that strength in the local currency is likely to impact negatively corporate profits, particularly when there are large export names such as Nestle, Roche and Swatch based in the country.
OTHER FX NEWS
Overnight AUD outperformed bolstered by a stellar December jobs report (Employment Change +37.4k vs. Exp. +5.0k (Prev. +42.7k, Rev. +45.0k) and a fall in the unemployment rate to 6.1% from 6.3%, supported by a surge in full-time employment 41.6k (Prev. 1.8k).
In other news of note, the RBI unexpectedly cut its Repo Rate by 25bps to 7.75% from 8.00% in a surprise move in an attempt to curb falling inflation. The central bank also cut its Reverse Repo Rate by 25bps to 6.75% but kept the cash reserve ratio unchanged at 4.00%. (BBG)
COMMODITIES
Overnight, the commodities complex staged a recovery as Brent crude broke back above the USD 50 handle and WTI rallied to trade near USD 50/bbl it’s the biggest surge in two-and-a-half years. Although, WTI and Brent has since come off best levels in the European session. Furthermore, COMEX copper prices have traded slightly rebounded from yesterday’s sharp decline to 5 and-a-half year lows providing the material sector with some reprieve. As we head toward the North American session, gold is testing its 200DMA at USD 1253.47 and has not traded above there since August 2014.
Other notable headlines via Bloomberg:
- Treasuries gain, led by 3Y and 5Y; 10Y yields at lowest since May 2013, 30Y near record low as Swiss National Bank unexpectedly drops franc cap, Reserve Bank of India cuts benchmark rate.
- OPEC cuts demand for its crude in 2015, already at 12-yr low, by 100k b/d to to 28.8m b/d; forecast U.S. output is slowing as prices tumble, group says in its monthly oil market report
- BP said to expects $50-$60 oil for next three years, BBC’s eco editor Robert Peston says in Twitter post, without saying where he got info
- CHF soars as SNB abandons 1.20 cap vs EUR, says enforcing cap no longer justified, brings forward planned rate cut -0.75% initially set for Jan. 22
- Move comes just one week before ECB policy makers meet to discuss the purchase of government bonds, a move that may add to pressure on the franc against the euro
- Indian stocks, bonds and INR surged after Rajan lowered repo rate to 7.75% from 8%, first reduction in 20 months; move sets India apart from BRIC counterparts Russia and Brazil, which boosted rates after currency declines that spurred inflation
- Yellen has signaled she wants to look past short-term market fluctuations and place economic outlook at center of policy making; to succeed, she must wean investors from the notion that the Fed will bail them out if their bets go bad
- Germany’s economy grew 1.5% in 2014, fastest pace in three years, matching median estimate in a Bloomberg survey
- China’s shadow banking industry staged a comeback in December as equity investors and local governments contributed to a surge in credit
- Bank of China Ltd. is suing a unit of Kaisa Group Holdings Ltd. after the developer skipped a payment on its USD bonds and as local creditors seek to recoup funds
- Sovereign yields mixed. Asian stocks rise; European stocks, U.S. equity-index futures decline. Crude lower; copper and gold higher
US Event Calendar
- 8:30am: Empire Manufacturing, Jan., est. 5 (prior -3.58)
- 8:30am: PPI Final Demand m/m, Dec., est. -0.4% (prior -0.2%)
- PPI Final Demand y/y, Dec., est. 1% (prior 1.4%)
- PPI Ex Food and Energy m/m, Dec., est. 0.1% (prior 0%)
- PPI Ex Food and Energy y/y, Dec., est. 1.9% (prior 1.8%)
- PPI Ex Food, Energy, Trade m/m, Dec., est. 0% (prior 0%)
- PPI Ex Food, Energy, Trade y/y, Dec. (prior 1.5%)
- 8:30am: Initial Jobless Claims, Jan. 10, est. 290k (prior 294k)
- Continuing Claims, Jan. 3. est. 2.4m (prior 2.452m)
- 8:45am: Bloomberg Jan. U.S. Economic Survey
- 9:45am: Bloomberg Consumer Comfort, Jan. 11
- 10:00am: Philadelphia Fed Business Outlook, Jan., est. 18.7 (prior 24.5, revised 24.3)
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"It's Turmoil"
Who could have seen it coming really7
This is strange. The minute Hong Kong trading closed, Gold began a $40 climb over the next 2 hours. Gold had been pretty well flatlined in Hoing Kong trading, so why the blast off when it closed? London trading and Hong kong overlap 1 hour, so it wasn't the London open that caused the increase.
Shenanigans.
ZH has too much tracking and advertising:
http://builtwith.com/zerohedge.com
So how much is enough?
All I would ask for is whichever is the one responsible for the video ads that auto play to be dropped. Annoying as fuck when I'm on my work computer and random nosies start coming from it.
Sounds like my client base. Annoying random noises. Huh.... same's the voices in my head, too. I wonder.....
So much shit on this site, I lol'd when the skyscraper banner on ZH's left-margin updated to a Charmin toilet paper banner (in spanish..) moments ago
You been watchin' too much kinky Spanish toilet paper porn.
You been watchin' too much kinky Venezuelan toilet paper porn.
I find that the ZH site loads more quickly and efficiently on my PC when I use Ghostery. Ghostery is a free download.
Load the plugin Adblock.
It's all Bullshit!!! I'll bet Draghi comes out with some BS about ECB and more QE and the markets end green.
I'm going to need a bigger tub of popcorn.
Meaning and Purpose of intelligent life is to convert energy into knowledge.
- Money - is primarily a mechanism to evaluate the expression and labor (work).
- Employment in turn, is a process of expenditure energy.
From which it follows that money and currency - a "Promissory notes for energy."
Energy - it is a physical phenomenon that exists in nature and the universe, regardless of humanity. Money (more correct currency) - it is only way of humanity, as the mechanism of definition and expression a quantifying energy.
In goods-money exchange, energy spawned goods and money and currency too - as a means of exchange of goods, works and services. It is obvious that the energy in the goods-money exchange, located above and goods and money / currency. Since it is the energy and generates first and second.
Thus, when we speak of "goods-money exchange" between the seller and the buyer, we are actually talking about the exchange of energy in the form of goods, for promise to return this energy, which expressed in the form of money/currencies.
That is, goods - is an energy that was embodied in a particular goods form.
A money-currency - is a bills for return this energy in future, like a promises, that this energy will return back in the future in the one or another form, that the owner of money can choose at their discretion.
Conclusion:
1. Energy - is money in their highest form.
2. Anyone who owns energy, may issue a bill on energy, that is will recognized by all the world as world currency.
Source RUS: http://www.kdggold.com/ru/information/energiya-eto-dengi-v-ih-naivysshei...
The foundation of the economic model of the EU - is the transformation of energy in various forms of trade. The entire economy of the EU is based on the transformation of energy in the form of industrial and agricultural goods.
Restricting access to cheap energy - is undermining the foundations of the economic model of the EU. Lack of energy will destroy the EU economy. Expensive energy, will make all European goods uncompetitive and also will destroy the EU economy.
Thus the EU will be destroyed as a rival to the United States and that the main purpose of the United States will be successfully achieved.
Pulling up an comfortable chair. Ready to watch the fun....
Events sure are coming thick and fast nowadays!
Yeah, and I'm making fresh ice for my scotch later on today.
Not too much later however.
Truthfully! I have a 9am appointment with my accountant to review my small business financials regarding taxes, O care, investments and the like...perhaps this is now unneccessary? Beside, I'd rather stay here, start drinking, and watch the fun!
Nah.... getchur taxes all done. Markets will continue to "funckciton" regardless.
happy 1040ES day......
planning...to run away
SNB: Surprise, Napping Bankers!
Still, given what we've seen, I wonder if the various carry-trade unwind equity mkt carnage will be offset at some point by the silly QE-anticipation algos (perhaps late Friday). 'Twould be healthier for markets if the former trumped the latter, as BTFD-ers won't stop until stopped (stopped out, that is).
If only we had a world currency.......
Never let a good "crisis" go to waste.
We have one, heavily suppressed at the moment though.
CARNAGE???????? Not in Stocks, apart from the SMI. All Central Banks must be all in now. This is just a taster of what is going to happen when the big Central Banks finally loose control as well. The question is not if, but when. The SNB is only casualty No 1!!
Spot on. DAX has recovered almost all of its earlier losses (down 300, up 300...).
The indices are not even down to where they were when the Yellen's 'Patient' FOMC minutes were released.
DavidC
Seems like a pretty good signal that EU QE is on.
Oui.
Seems like a pretty good signal that EU QE is on.
Hold on....
https://www.youtube.com/watch?v=srw3RdiIlrQ
Vlad " is Paris burning" Gartman is upset with the snb On squeak box. Big losses world wide
For the record, George Soros was managing money for, and working with, the people that made his pound bet a winner. It was a decision to change pound policy he knew about beforehand and helped arrange. He didn't break shit. Soros and a bunch of other corrupt asswipes made it happen, and made money on it. It was entirely insider trading--Which sadly is legal in FX.
I'm sitting idly by waiting for housing bubble 2.0 to burst. I think we are at the point that the needle is about to hit the balloon. Looking at my area on Zillow, lots of blue dots keep popping up, and I've noticed quite a few homes that were foreclosed on last year (in desirable areas none the less), are not being placed on the market by the lenders. This tells me the shit is nearly at the fan.
According to the sure-bettors, the SNB dropped a huge tab of acid.....
Well ,,,,its all over now, someone just hit the buy moar button
All back to normal...that was fast...looks like there will be no fartboxes tounge punched today after all.
Coming: the new hit Show on CNBC: MOA...Markets of Anarchy
Episode 1: The Market meets Mr. Mayhem
Excerpt:
White House speaker: "Mr. President, you have to say something to support the market"
President: "Oh...err...we mayhem'd some markets"
Market: (applauds heavily and makes new highs)
Moments ago, the SNB discontinued the minimum exchange rate and lowered their deposit rate even further, to -0.75 percent. The move has surprised everyone, and I mean everyone. Nobody saw this coming.
http://www.globaldeflationnews.com/lets-be-franc-the-swiss-central-bank-...
Dollar strength in 5..4...3.....
Commodities crushed. Us equities much much higher. Balls to the wall bullish.
Euro sellers are your new greater fool
o my god i am scared hold me
Looks like ur already being held to me.
This is going to be another 400 point up and down day for the US market....they will play this all day long....get your swiss army knife today..before the price increase...
I'm glad ur not my broker, I'd be broke by now.
Like a 100 MPH handlebar/tank slapper on a motorcycle, until the rider gets ejected from the violence of the event. It's definitely popcorn week.
Is Kevvy working overtime on the S&P futures ramp?
More new variables for traders to have to understand, work against and try to predict. More new parameters to program into the algos to keep them working. Uncertainty breeds fear. Fear pushes people to ..... gold? I'm beginning to sense the strain against the great iron doors of gold market price suppression.