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Germany Enters Correction; EMs In Longest Losing Streak Since 1990 Routed By Turkey, Obama Turmoils Dollar
While there were key macroeconomic data out of Asia earlier in the session, with Japan revising its Q1 GDP up from 2.4% to 3.9% (due to an upward revision to capex) making some wonder if it simply didn't snow in Japan this winter, as well as Chinese trade data that was once again disappointing with the third consecutive drop in exports coupled with an 18.1% collapse in imports hinting that nothing is going well in China's economy (which once again sent stocks soaring this time up another 2.2% on certainty another PBOC rate cut is imminent, pushing the PBOC to a fresh 7-year high of 5,132), it was actually a leaked Obama comment on the strong USD that moved markets.
Shortly before 3 am Eastern, BBG blasted the following:
- FRENCH OFFICIAL: OBAMA SAID STRONG DOLLAR IS PROBLEM
Which promptly set the USD tumbling:

... before just one hour later, the US realized leaks like this are not allowed, the Fed as an "independent" organization, and that Obama really meant the strong USD is good if anything, we got the following headline:
- U.S. OFFICIAL: OBAMA DIDN'T SAY STRONG DOLLAR WAS A PROBLEM
Which in turn strenghtened the USD...

... but only modestly showing that the market realized the official US position had indeed been leaked and that as explained before, the Fed is cornered, on one hand unable to hike due to further USD profit-crippling strength, on the other unable to keep rates low over market stability and credibility concerns.
In other news, with Greece hanging around Europe's neck and this week seen by most as the decisive one in which a deal needs to get done ahead of a the June 30 "red line" deadline, German stocks are finally feeling it and a few hours ago the Dax entered correction territory, dropping 10% from its April highs.
Elsewhere, as previously reported, following yesterday's surprise Turkish election outcome, the Turkish Lira continued its plunge, and dropped as much as 5% in earlier trading to a record low 2.80 before correcting modestly. In related news, the MSCI's main Emerging Market index posted its longest, 11-day losing run since 1990 driven by the 6% tumble in Turkish stocks.
Emerging market stocks drop for an 11th day: That hasn't happened since 1990... pic.twitter.com/jKoybdbe7j
— Mark Barton (@markbartontv) June 8, 2015
A more in depth-look at global markets from RanSquawk notes that Asian equities struggled to find direction as participants reacted to Friday US NFP report, which saw US equities finish in the red as participants brought forward rate lift-off expectations. This further weighed on emerging market stocks which are now on course for their longest slump since 1990. Nikkei 225 (-0.02%) fell as final Q1 GDP revisions marked the best quarter for Japanese growth in 2yrs, tempering possibility of near-term BOJ easing (Q/Q 1.0% vs. Exp. 0.7% (Prev. 0.6%). Elsewhere, the Shanghai Comp. (+2.2%) and Hang Seng (+0.21%) rose with the former extending on 7-year highs, as participants digested today’s mixed Chinese trade data. The headline reading posted the 3rd largest surplus on record (59.49bln vs. Exp. 44.80bln) while exports and imports saw a 3rd and 7th consecutive monthly decline, respectively.
European equities kick off the week in the red, with the DAX officially slipping into correction territory as the index has fallen by around 10% from highs seen in April. Today’s session has been largely dominated by a number of major M&A stories in Europe, including Shire (-1.6%), Actelion (+7.6%), Diageo (+6.5%), BT (+1.2%) and Deutsche Telekom (+0.2%).
Elsewhere, Deutsche Bank (+5.8%) are among the best-performing stocks in Europe after Co-CEO’s Jain and Fitschen stepped down, with optimism surrounding the German Bank as incoming CEO John Cryan is said to be responsible for the turnaround of UBS whilst serving as CFO.
Bunds has continued its downward trend, shrugging off reports that negotiations between Greece and its creditors have reached an impasse as relations with Greek PM Tsipras and EU Chief Juncker are said to have soured after Tsipras branded the latest EU proposals as insulting.
The USD was initially pressured in the wake of comments from a French Official at the G7 who quoted US President Obama saying that the strong USD is a problem, which saw USD/JPY falls to fresh lows and other major pairs at highs including EUR/USD and GBP/USD. However, the USD pulled off worst levels after US Officials later stated that the President had been misquoted which sent GBP/USD into the red, while EUR/USD held onto its gains, albeit off best levels. Separately, USD/TRY printed a fresh record high, while Turkish stocks were down 10% in the wake of the Turkish elections over the weekend which showed PM Erdogan's AK Party failing to secure a single-party government.
In the commodity complex, newsflow has remained light with WTI and Brent consolidating in modest negative territory after largely tracking fluctuations in the USD-index in early trade thus far. In the metals complex, a similar story can be told with spot gold trading relatively sideways amid scarce newsflow.
In summary: European shares fall with the basic resources and oil & gas sectors underperforming and food & beverage, telco outperforming. Germany’s DAX fell as much as 10% from its April peak. Deutsche Bank shares gain most since 2013 after CEO change. Lira Slides, Turkish Stocks Plunge as Erdogan’s AK Single-Party Era Ends. The Dutch and Spanish markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. Greek 10yr bond yields rise; German yields increase. Commodities little changed, with WTI crude, Brent crude underperforming and natural gas outperforming.
Market Wrap
- S&P 500 futures down 0.1% to 2089.8
- Stoxx 600 down 0.4% to 387.6
- US 10Yr yield down 2bps to 2.39%
- German 10Yr yield up 3bps to 0.87%
- MSCI Asia Pacific down 0.4% to 147.4
- Gold spot up 0.2% to $1174/oz
- Asian stocks fall with the Shanghai Composite outperforming and the Sensex underperforming; MSCI Asia Pacific down 0.4% to 147.4
- Nikkei 225 little changed, Hang Seng up 0.2%, Kospi down 0.1%, Shanghai Composite up 2.2%, Sensex down 0.5%
- Apollo Is in Talks to Buy Saint-Gobain Unit for $3.3b
- GE Said to Near Canada Deal as Ares Seeks Other Loan Assets
- Actelion Surges on Report of $18.9b Shire Approach
- Swedish Orphan Says Talks on Possible Takeover Offer Have Ended
- Monsanto Offers to Pay Syngenta $2b If Takeover Fails
- Euro up 0.17% to $1.1133
- Dollar Index down 0.06% to 96.25
- Italian 10Yr yield down 1bps to 2.23%
- Spanish 10Yr yield little changed at 2.22%
- French 10Yr yield up 3bps to 1.2%
- S&P GSCI Index little changed at 433.1
- Brent Futures down 0.3% to $63.1/bbl, WTI Futures down 0.5% to $58.8/bbl
- LME 3m Copper little changed at $5934.5/MT
- LME 3m Nickel down 0.3% to $13140/MT
Bulletin Headline Summary from RanSquawk and Bloomberg
- Comments from a French Official suggesting that Obama views USD strength as a problem see early USD weakness before being refuted by the White House later in the session
- The DAX has entered correction territory from its April high with a raft of M&A stories in Europe failing to help
buoy sentiment - Looking ahead, today sees a relatively light calendar with no tier 1 data release, however comments from BoC
Deputy Governor Wilkins, ECB’s Mersch (Soft Hawk) and ECB Nowotny (Hawk) - Treasuries gain, 10Y yield retreats from highest level since October; events this week include Retail Sales and PPI, 3Y/10Y/30Y auctions starting tomorrow.
- With talks between the Greek government and creditors due to resume in Brussels on Monday, PM Tsipras faced a united front from G-7 leaders calling for movement to end the impasse and avert the risk of wider economic reverberations
- Even if Tsipras clinches as much as EU7.2b ($8b) from a bailout tranche creditors are withholding, he’s going to need another cash infusion shortly thereafter
- China exports fell 2.8% in May while imports slid 18.1% leaving a trade surplus of $59.1b; U.S. demand helped prevent a deeper decline in shipments abroad
- German industrial production rose 0.9% in April, more than forecast, after falling a revised 0.4% in March, data from the Economy Ministry in Berlin showed on Monday
- Deutsche Bank named supervisory board member John Cryan, a British takeover specialist, as next CEO; will replace co-
CEO Anshu Jain at end of this month, Juergen Fitschen next May - After dominating Turkey for more than a dozen years, Erdogan’s grip on the country loosened after the party he founded lost control of parliament following an election campaign marred by violence
- Sovereign 10Y bond yields mostly higher. Asian stocks mostly lower, European stocks, U.S. equity-index futures decline. Crude oil lower, copper unchanged, gold higher
US Event Calendar
- 10:00am: Labor Market Conditions Index Change, May (prior -1.9)
DB's Jim Reid summarizes the key weekend and overnight events
The bond market also felt the heat last week with 10 year bunds seeing an range of 52bps but closing 15bp off the wides for the week as the sell-off baton passed to US Treasuries after a strong payroll number (280k vs 226k expected) on Friday. 10yr yields climbed to an intraday high of 2.435% before finishing the day around 3bps off those highs at 2.408% (10bps wider on the day). They closed 29bps higher on the week and now at the highest since 6th October 2014. We have a series of US Treasury auction this week starting tomorrow (3yr, 10yr and 30yr) so it'll be interesting to see how this new supply will be absorbed by the market.
US equities fared reasonably well in comparison. The S&P 500 recovered from the initial opening lows to finish the day just 0.14% lower. Lower beta sectors which are perhaps more sensitive to rates led the index lower with Telcos (-1.8%), Consumer staples (-1.3%) and Utilities (-1.3%) all lower. Energy (+0.6%) and Financials (+0.5%) were key gainers. The latter probably fuelled by hopes of a post-hike margin boost whilst the former perhaps reacted to a near 2% bounce in Brent (despite NFP driven Dollar strength on Friday). HY Energy credits failed to mirror the moves in equities with index level spreads closing the day around 14bps wider. Broader US IG credits held in better with spreads just around 1bps wider on the day.
Taking a closer look at Friday’s payrolls, Joe Lavorgna basically thinks the outsized gain in job growth along with upward revisions brings the Fed one step closer to a September lift-off. The NFP headlines rose 280k following 32k in net upward revisions. This moved the 3month moving average payrolls up 5k to 207k. We’ve now seen four out of five +200k plus payroll prints this year. Joe noted that job growth in May was broad based across sectors with a sharp fall in mining and logging (-18k) driven by pullback in energy related spending. The unemployment rate edged up to 5.5% from 5.4% in April due to a relatively large (397k) increase in labour force participation.
On the other side of the pond there is still no clear progress in Greece. Friday saw Greece’s Athex index finish around 5% lower on news of deferring the IMF payments. Greek bonds sold off further with the 10yr closing 30bps higher at 11.2%. At home PM Tsipras showed little signs of compromise on Friday after having told the Greek parliament that the creditors’ proposals are unrealistic and labelled the latest offer from creditors as “a bad negotiating trick”. EC President Juncker said that Tsipras had misrepresented aspects of the negotiations. Greece was also a key conversation point at the G7 Summit in Germany over the weekend. During a bilateral meeting with Merkel, President Obama called for Greek reforms and return to sustainable long term growth. Bloomberg noted that Greek negotiations will resume today and will likely continue on the sidelines at an EU-Latin America summit in Brussels on Wednesday.
Turning to Asia, Chinese trade data was the key release overnight. Exports fell for the third consecutive month in May (down 2.8% yoy) but was better than market consensus (-4.0% yoy). Imports fell -18.1% yoy (vs consensus of -9.6% yoy) largely driven by lower raw material prices (eg oil and iron ore). Markets are mixed overnight though but with Chinese equities continuing to outperform. The Hang Seng, the CSI 300 and Shanghai Composite are +0.3%, +0.7% and +0.9%, respectively as we head to print. Although the Shenzhen is down -1.9%. Elsewhere in Asia bourses in Japan and India are down -0.3% and -0.4% respectively. As we type, UST 10yr yield is steady at 2.40% whilst Brent is touch softer at US$62.7/bbl (-0.9%). Asian credit spreads are broadly flat to a touch weaker likely driven by the stronger NFP on Friday.
Onto this week’s calendar now. We start in Germany this morning where we are due to get the April industrial production and trade balance readings. Business sentiment for France and investor confidence for the Euro area are other data points. It’s the usual post payrolls lull in the US meanwhile with the just the labour market conditions index expected. We kick off Tuesday in Asia where get the all important CPI/PPI readings out of China as well as consumer confidence for Japan. In the European timezone we get the preliminary Q1 GDP print for the Euro area, as well as UK trade data and German labour costs. In the US we get JOLTS job openings, wholesale inventories and trade sales and the NFIB small business optimism survey. We kick off Wednesday in Japan with machine orders and PPI. Industrial and manufacturing production readings for France, Italy and the UK will be the focus of the European data. In the US on Wednesday we’ve just got the May monthly budget statement to look forward to. Thursday’s early highlight will be out of China where we get retail sales, industrial production and fixed asset investments. French CPI is the only highlight in Europe on Thursday while in the US the calendar picks up a gear with May retail sales, initial jobless claims, import price index and business inventories. We end the week on Friday in Asia with capacity utilization and industrial production for Japan. In Europe industrial production for the Euro area is due, as well as construction output for the UK. We end the week in the US on Friday with PPI and the University of Michigan consumer sentiment. Of course Greece headlines will also likely be a main focus for markets again this week.
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Funny how Greece is always in crisis during the week, and then takes a break over the weekend. I guess we will know when the shit is close to the fan, when we start reading about it on Saturday or Sunday!
Anything telegraphed is not real.
Anything real will not be telegraphed.
Man, the manipulation demand is outrageous.
OT, Stephen Stubbs and what witnesses are telling him about the Waco biker shootout at Twin Peaks:
https://www.youtube.com/watch?v=DDg3WPyBwwE
We now return you to moar contrived numbers, false choices and happy thoughts from the central planning department at .gov ;-)
Chaos and lawlessness everywhere would appear.
Mexican drug lords, Columbia versus Venezuela, Brazilian corruption at the highest level, Yakuza in Japan, who knows what in China, Putin's Russia, France in general just being a criminal State...Greece, Cyprus, the Banks...has a single terrorist group been defeated since the "War on Teror" began? They all look stronger and more organized to me now.
And of course "thenk God for Wall Street being above reproach."
Sorry but treasuries, the energy complex and cash still look like the only thing standing in the way of total anarchy..still.
LOL. You mean that specific Empire is The Only Thing Standing In The Way Of Anarchy? You are not much of a believer in republicanism or democracy, are you?
Ghordo -
Tell me how you think this Greek drama plays out. In 2012 you preached essentially exactly what happened. I would love to hear your thoughts as to how the current situation plays out.
I was not finished with disabledvet, I was in the process of adding:
Organization is spontaneous, in humans. On the offense as much as on the defense
yes, offense organizes itself. witness drug lords, war lords, pirates, etc. but offense has no monopoly on that, defense from aggression is as spontaneous and capable of organization
Hey, I could take a stab at that answer and predict..... it will have something to do with a can and some sort of foot motion.
endless football without any "GOOOOOOOOAAAAAALLLLL!" sounds? life is a kind of "kicking the can" exercise
Haus, I don't claim to know the future, in fact I think it's impossible to predict it thanks to the fact that it involves billions of humans
What Greeks are currently asking is simply too much, both from Germany and all the other EU countries
In fact even among the 188 countries that are members of the IMF and so creditors of Greece there are many poorer then Greece, and asking why
The same applies to the EU, where there are several poorer countries that are in many ways grumbling about Greek opinions about the whole deal
Germany? You know. In short, from a German point of view Greece is asking for the same deal as the DDR... without what the DDR went through, including the loss of sovereignty
Meanwhile America is breathing hard (on our necks), thinking more in geopolitical terms and scared shitless about a "Second Lehman"
And Russia is thinking only on capitalizing on the intra-eurozone disputes. Russia is still very ambiguos about the EU and the EUR... while facing similar issues and thinking about similar methods for them
From a formal point of view, the drama can be protracted for much, much longer. But both me and Juncker are very disappointed about the last speech of Tsipras in front of the Hellenic Parliament. He scored a few volatile brownie points at the expense of credibility towards the European partners. This might become the reason for his ejection, soon, by the hands of a disgruntled body of elected Greeks
As I was saying last time, it all depends on when a Greek government puts numbers on the public plate, for public discussion. "Going Zambia" has bought them one month, but they have no preliminary, acceptable-for-the-creditors plan to discuss in public, and that is the Greek Gov's fault
If nobody slips, it will be all solved by September and then December. If somebody slips, it becomes much more difficult, or dangerous. But those dangers aren't those that are being peddled by the American and Russian "Fear Machines"
I repeat: the key moment is when a Greek Gov makes a proposal to the public. The same Greek public that applauds it's current efforts by 60% but has increased (!) it's liking of the EUR to 80%
Tsipras just ruled out new elections, which means he isn't going to try and clairfy his mandate at the polls.
This tells me his mind is made up. If he caves on austerity he has a political crisis and goes back to the polls.
If he just flat leaves the EUR, it too will create a political crisis and he goes back to the polls.
This tells me he is going to keep the status quo, and either drive the Greek banking system into a wall, default, or force ze Germans to cave.
The more I read your writing, the more I think you are an odd flavored SPD voter.
Haus, new elections are possible, but the same result can be found by a simple rearrangement of the executive
"odd flavored SPD?" LOL
first, check on the replies you received today. I explained to you what I am
second... you did realize, by now, that the most common form of conservativism on the continent is not the liberal-conservative form you are used to, but a social-conservative type, don't you?
you just have a typical propaganda-generated fear of every kind of socialism
the Scottish National Party, for example, is social-conservative. Or the CDU. Hell, the Bavarian Christian Social Party is even called that way
for them, I'd be more represented in their liberal wings
I am a centrist. Not something you were ever exposed to, I fear. Or something you are looking for, in politics, since it represents... moderation
Everything is fine until the cops show up.
too funny. now they got owebomba jawbone-generating some fake fx trading volume. "the market" hahahahaha!
It's ok, it's not that bad.
Chinese housewives to the rescue!
can't believe owebomba uttered the word "problem".
the horror...
That and the fact he has no idea how foreign exchange rates affect anything is why I actually believe the WH denial in this case.
only thing real is what you and i do today; where as we see it, touch it.
all else is fucking bullshit...
read on, ha.
Germany enters recession because greeks stopped buying german cars
Cabalists Bandy Around "Repricing"
http://winteractionables.com/?p=21599
Maybe if the dollar was devalued 100% the economy would boom! 200% ? 300 ?
Yep I bet the ussa would be the new economic miracle. Production would leap, High paying jobs galore. National debt paid in full, Taxes to zero. It will be glorious.
Strong dollar,,,, phew, phew, phew, spit.....
If only.
"... the Fed is cornered, on one hand unable to hike due to further USD profit-crippling strength, on the other unable to keep rates low over market stability and credibility concerns."
The FED is cornered, because they shouldn't be manipulating the market in the first place. A manipulated market always manipulates back. Newton discoverd there is an equal and opposite reaction.
QE doesn't work and Bernanke knew that back in 1988 or before, for that matter. All these money games don't work in the end. 1+1 has always equaled 2.