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Futures Surge As ECB Bankers Resort To Verbal Intervention, Suggest More QE Needed
After two consecutive days of miserable Chinese econ data, when first imports and exports, and then wholesale deflation disappointed for one more month, overnight we got even more Chinese data this time on the "credi input end" when Beijing reported its September money creation statistics.
Overall M2 rose at 13.1%, in line with consensus, and the highest since June, but where things improved notably (if one considers an overindebted China rushing to add even more debt an improvement) was in total CNY loans which rose from CNY810BN to CNY1.05TN or CNY150 billion above consensus, as well as a jump in total social financing which printed at CNY1.3 trillion vs CNY1.3 trillion consensus, up over CNY200BN in the month, and the highest print since June.
Monetary data summary
Total social financing breakdown
As Goldman summarizes:
"September monetary conditions remained ample. Ample monetary conditions are helpful in supporting the economy which has been weak after the middle of the year. We do not think the recent change in collateral requirements for small enterprises and agricultural related relending will have a big additional impact on monetary conditions. But the central bank still needs to cut RRR amid continued (but reduced) outflows and the recent increase in repo rates, and also lower interest rates amid lower CPI inflation to just keep monetary conditions stable."
Aside from Chinese monetary data, it was a relatively quiet session in which traders were focusing on every move in the suddenly tumbling USD, and parsing every phrase by central bankers around the globe, as well as the previously noted piece by Fed mouthpiece Jon Hilsenrath which effectively ended the debate whether there will be rate hikes in 2015.
Adding to the overnight froth, were ECB speakers - first Ewald Nowotny and then Spain's Restoy - who said that euro-area core inflation "clearly" below goal, remarks which were immediately assumed to signal increasing pressure to boost stimulus, and which promptly translated into even more weakness in EUR and strength in Bunds throughout the European morning. Ironically this is just a flipflop from late September, when Draghi implicitly stated no to expect more QE from the ECB so the focus turned to Japan. However, with the USDJPY tumbling, the signal is clearly that Kuroda will now wait, and all eyes turn back to Mario Draghi.
This back and forth will continue until neither one hikes, or until the market loses patience and something snaps badly forcing the central banks - which are desperate to jawbone as long as possible because they all know any incremental act will merely accelerate the endgame in which they have no choice but to paradrop money - to act.
In any case, with the dollar tumbling early in the overnight session, and with the ECB only adding fuel to the "more QE" fire, futures have soared and more than wiped out most of yesterday's losses, despite Walmart which this morning continues to slide and was down another 1% at last check below $60, on pace to boost the dividend yield to 4%.
Looking at stocks, starting in Asia we saw equity markets shrugged off the lacklustre close on Wall Street to trade higher, as poor US retail sales pushed back Fed rate hike expectations . Nikkei 225 (+1.2%) recovered back above 18,000 after USD/JPY rebounded off its lows, while the ASX 200 (+0.6%) was underpinned by mining names after gold prices climbed to 3%-month highs. Hang Seng (+2.0%) and Shanghai Comp. (+2.3%) resided in positive territory amid gains in telecoms, following the announcement that 3 top telecom firms will combine some assets into a new entity. JGBs traded relatively flat despite the strong risk on sentiment in markets, while the BoJ also entered the market to purchase JPY 1.18trl of government bonds.
Stocks in Europe traded higher since the open (Euro Stoxx: +1.4%), as the release of lower than expected US retail sales yesterday , together with less than impressive start to the latest US earnings season, continued to dampen rate hike expectations by the Fed. This together with dovish comments by ECB's Nowotny who said that additional set of instruments are necessary, meant that despite the supply from Spain and France, Bunds traded in the green this morning.
In terms of notable equity movers, Burberry shares (-12%) slumped over 10% at the open to its lowest level since June 2013 after reporting weak sales performance which was adversely impacted by the slowdown in China. Going forward, market participants will get to digest the release of earning reports by major Wall Street heavyweights such as Goldman Sachs and Citigroup, as well as trade updates by Phillip Morris, Schlumberger and UnitedHealth.
The dovish comments from ECB's Nowotny saw an immediate pronounced effect on EUR, which weakened sharply across the board and in turn resulted in GBP outperforming its counterpart, keeping the pair above the key 100DMA level. The downside in EUR, combined with pushed back Fed rate hike expectations has seen a bid in safe haven currencies, with the likes of CHF and JPY both seeing notable strength today , while NZD/USD has continued its recent strength to reach its highest level for 3 and a half months.
WTI heads for its longest losing streak since July after falling for a fourth consecutive day, after yesterday's API crude inventories showed the largest build since April (9300K Prey. -1200K). Brent and WTI have continued to edge lower throughout the European session.
Elsewhere gold trades near 3 and a half month highs following a push-back in Fed hike expectations following yesterday's weak retail sales data and PPI readings. Elsewhere in the metals complex, some mild strength has been seen in base metals, as a result of USD weakness.
Apart from focusing on corporate related news flow, traders will also await the release of the latest US weekly jobs report, CPI, Empire Manufacturing and Philadelphia Fed survey. Later today we also sees the release of DoE inventories (Exp. 2577k vs. Prey. 3073k) which after yesterday's stunning API inventory build have the potential to send WTI back under $45.
Bulletin Headline Summary from RanSquawk and Bloomberg
- ECB's Nowotny stated that additional set of instruments are necessary, which saw weakness in EUR and strength in Bunds throughout the European morning
- Stocks in both Europe and Asia traded higher as the release of lower than expected US retail sales yesterday weighed on Fed rate lift off expectations, with ECB's Nowotny's adding further strength
- Today's highlights include US weekly jobs report, CPI, Empire Manufacturing, Philadelphia Fed survey, DoE inventories update and also EIA natural gas storage change as well as a number of high profile earnings
- ECB’s Constancio sees “potential spillovers” of zero lower bound exit on other countries in short run
- Bank of Korea cuts 2015, 2016 GDP and CPI forecasts
- Treasuries decline, paring gains seen yesterday after weaker than forecast retail sales, WMT profit warning pushed Fed liftoff expectations further into future.
- If a December rate hike is looking less likely, it’s not because debate among policy makers has gone increasingly public in recent days, but because the economic data are shifting against those in favor of a move this year
- ECB’s Ewald Nowotny said both headline and core inflation in the euro area are “clearly” undershooting the institution’s goal, signaling that more stimulus may be needed
- Germany’s Merkel, facing growing criticism from within her own party for her handling of the refugee crisis, urged lawmakers to prepare for the long haul as asylum seekers continue to surge into Europe
- The German government forced Volkswagen AG to recall about 2.4m diesel cars after authorities rejected the carmaker’s proposal for voluntary repairs
- Russia’s Putin said U.S. policy on Syria is weak and lacks objectives, though he remains open to direct talks as Russia continues its bombing campaign in support of Syrian leader Bashar al-Assad
- The U.S. will keep about 5,500 troops in Afghanistan into 2017, slowing the administration’s withdrawal timetable and ensuring that America’s longest war will endure beyond Obama’s term in office
- Nomura Asset Management Co. will halt orders for its Next Funds Nikkei 225 Leveraged Index ETF and two other funds from Friday on concern it’s becoming too large for the futures market it uses to track Japan’s most famous stock index
- Sovereign 10Y bond yields mostly higher. Asian and European stocks gain, U.S. equity-index futures rise. Crude oil lower, copper gains, gold little changed
US Event Calendar
- 8:30am: Initial Jobless Claims, Oct. 8, est. 270k (prior 263k); Continuing Claims, Oct. 1, est. 2.200m (prior 2.204m)
- 8:30am: Empire Manufacturing, Oct., est. -8 (prior -14.67)
- 8:30am: CPI m/m, Sept., est. -0.2% (prior -0.1%)
- CPI Ex Food and Energy m/m, Sept., est. 0.1% (prior 0.1%)
- CPI y/y, Sept., est. -0.1% (prior 0.2%)
- CPI Ex Food and Energy y/y, Sept., est. 1.8% (prior 1.8%)
- CPI Index NSA, Sept., est. 237.821 (prior 238.316)
- CPI Core Index SA, Sept., est. 243.022 (prior 242.693)
- Real Avg Weekly Earnings y/y, Sept. (prior 2.3%)
- 9:45am: Bloomberg Consumer Comfort, Oct. 11 (prior 44.8)
- 10:00am: Philadelphia Fed Business Outlook, Oct., est. -1 (prior -6)
Central Banks
- 10:30am: Fed’s Bullard speaks in St. Louis
- 10:30am: Fed’s Dudley speaks in Washington
- 4:30pm: Fed’s Mester speaks in New York
DB's Jim Reid completes the overnight wrap
Global markets have been inflation deprived with weak US PPI yesterday (-0.5% mom vs. -0.2% expected) adding to a series of similar prints so far this week. We've seen only the second monthly deflation print in the UK in nearly 60 years on Tuesday, softer Chinese CPI yesterday (as well as persistent PPI deflationary pressure), various soft European prints of those reporting so far, while there’s been little evidence of a pickup in prices in Japan when they reported last month. As we'll also see in the day ahead, US CPI will also likely to dip into deflation yoy later today. For now all this surely means central banks have the green light to extend stimulus. We have long thought that this continued monetary stimulus will struggle to help economies much but it’s been dangerous to bet against it impacting asset prices. Over the last month or so we've frequently been asked whether we thought monetary policy had reached its limit. Our answer has been that as a positive economic driver its long been fairly impotent however there is no reason why central bank balance sheets couldn't increase notably further. This is such a unique global experiment already that who's to say it can't still go further. There is no limit to the size of central bank balance sheets until markets rebel. The current era of financial repression makes such rebellion harder though.
There was plenty going on in markets yesterday. Along with the US PPI numbers, soft September retail sales data saw US Treasury yields tumble lower and Fed rate hike expectations pushed back further. Looking at the details, headline retail sales advanced +0.1% mom last month, below expectations of +0.2% with the August print revised down two-tenths alongside. The numbers were softer than expected at the core too. Retail sales ex auto and gas printed at 0.0% mom (vs. +0.3% expected), while more concerning for Q3 GDP growth forecasts, retail control fell -0.1% mom (vs. +0.3% expected), including a cumulative three-tenth downward revision to the prior two months readings. That saw the Atlanta Fed nudge down their Q3 GDP forecast by a tenth to 0.9%, while US Treasury yields (-7.2bps) marched back below 2% to close at 1.973%. The USD came under pressure and finished weaker against all but just three currencies yesterday (with the Dollar index down 0.89%). Meanwhile, Fed rate hike expectations were hit hard, with December and March expectations down to 27% and 49% as of this morning, a fall of 8% and 10% respectively relative to 24 hours ago.
It wasn’t just rates markets in focus yesterday. Risk assets were also front and centre after a weak session across the board. European equities slid (Stoxx 600 -0.74%, Dax -1.17%) following a weak Asia session post the China data, while Xover leaked 11bps wider. Mid-afternoon, with markets still digesting the soft retail sales data a couple of hours prior, US retail giant Wal-Mart then weighed in, sending US equities tumbling after slashing its profit forecast for the fiscal year ahead. The company announced that it expects earnings to decline 6% to 12% in the next fiscal year, impacted by a higher wage bill and investments in ecommerce. The guidance came as a shock to the market after street consensus was expecting a 4% profit gain in the period. Wal-Mart’s share price plunged 10% on the news and the most since 1988, helping to fuel moves lower for the S&P 500 (-0.47%) and Dow (-0.92%) while in credit markets CDX IG ended just shy of a couple basis points wider.
It’s been a much more positive start in markets in Asia this morning, shrugging aside the weakness in US stocks and seemingly buoyed by yesterday’s soft US data fueling expectations that the Fed will stay put for some time. In China the Shanghai Comp and CSI 300 are up +1.40% and +1.43% respectively, while in Japan the Nikkei is +1.43%. The Hang Seng (+2.16%), Kospi (+1.11%) and ASX (+0.62%) have also seen gains this morning, while the Bank of Korea has kept rates on hold as expected, but at the same time lowered its growth and inflation forecasts for this year and next. S&P 500 futures are pointing towards a positive start, up half a percent, while Asia credit is 5bps tighter this morning.
Moving on, after some concerns in the JP Morgan earnings released late on Tuesday, there were better numbers to be had out of both Bank of America and Wells Fargo, who both reported beats at the profit and revenue lines yesterday in their latest quarterly report. Meanwhile Netflix was the notable reporter after market hours, missing at both levels after disappointing the market on the number of domestic subscribers added during the quarter.
There was more Fedspeak for us yesterday too with Lacker the latest Fed official to speak. In an interview with Fox, the Richmond Fed President said the latest retail sales data did not change his fundamental outlook and while he wasn’t certain if the Fed would raise in October, his overall views haven’t changed much from September, noting in particular that real interest rates should probably be higher.
Staying on the Fed, the release of the Beige Book yesterday didn’t offer too many surprises. Of particular note however was the mention from some districts of pressure in manufacturing activity which was said to have ‘turned in a mixed but generally weaker performance’, largely impacted by the stronger dollar. Consumer spending was said to have grown modestly, while price pressures were said to be ‘contained’. While nine of the twelve districts reported modest of moderate growth, concerning was the mention of wage gains being just ‘mostly subdued’.
Wrapping up yesterday’s data, over in Europe we saw Euro area IP print in line at -0.5% mom in August, dragging the YoY rate down to +0.9%. With regards to the inflation numbers, France reported an as expected -0.4% mom headline print, which resulted in the YoY rate staying at a still very low 0.0%. Meanwhile Spain reported a -0.3% mom headline decline, in line with Bloomberg estimates and with the YoY rate unchanged at -0.9%. Elsewhere, in the UK the latest employment report was largely good news. The ILO unemployment rate fell one-tenth to 5.4% in the three months to August, the lowest level since June 2008. Employment rose 140k, however average weekly earnings were up less than expected (+3.0% vs. +3.1% expected) over the three months, a rise of one-tenth.
Looking at the day ahead, with nothing of note in Europe this morning its all eyes on the US this afternoon with the September CPI print the highlight. Consensus estimates are for a soft headline reading (-0.2% mom) which will be enough to drag the YoY back into deflationary territory at -0.1%. Estimates for the core are running at +0.1% mom, with the YoY rate unchanged at +1.8%. Away from this, we’ll also get initial jobless claims, October empire manufacturing, average weekly earnings, the Philly Fed business outlook print and the September monthly budget statement later tonight. Fedspeak wise we are due to hear from Bullard and Dudley, both due to speak at 3.30pm BST, followed by Mester later tonight (due 9.30pm BST). On the earnings front, Goldman Sachs and Citigroup are the banks due to report in the early afternoon, while Schlumberger (after the close) will be worth keeping an eye on as an early indicator into the energy sector.
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The entire developed world turning slowly into Japan is a lot more boring than I thought it would be.
And Japan is a broken, debt laden mess, supported only by the rest of us. Now we have joined them there is no support left for anyone.
Verbal Intervention
If that doesn't work.....we're gonna pull out the ping pong paddle.
It smarts.....you don't want to know.
Heroin junkie: "Just one more shot and I'll quit cold turkey, I promise."
Come on, Tylers, you guys are slow as f**k!
http://www.theguardian.com/world/2015/oct/15/obama-delay-withdrawal-us-t...
Debt in EU, USA and Japan is unpayable. So more QE and NIRP will be used to postpone the inevitable. Then when the economic system collapses, there will be chaos and war.
Old Yeller only needs to prop this pig up until after Obola is out of office and she resigns for 'health reasons'. Let the next administration along with Congress get the blame for the collapse, while she makes big money giving speeches a la Bernanke.
Obola aint going no where after martial law is declared sometime next year.
there will be chaos and war.
You left out the millions of people getting killed.....that's the fun part.
From Ukraine to Germany to China to Cambodia to Cuba......we're pretty damn good at killing people.
Yes... or there is a far-fetched chance they could delay collapse until the national gold leases expire...or many of them, in any case until the Gold is returned.
Then they could revalue the price of gold upward until it is high enough, at some realistic percentage of backing (history suggests a minimum of 20-30%), to allow them to retire the current currency and the debts it requires.
That is the only way they will be able to reset the system.
Shortsighted bankers will fight it, because they will realize that they can't leverage up 100-to-1 any longer under that system...and they will no longer be in such a preferential place in the system.
But, truly, their only choice is that, or disorganized currency collapse via INFLATION, which heals their loan book, but gets out of control with unpredictable results, OR the natural tendencies of the leverage in the monetary and banking systems will collapse in debt contagion, in which case the bankers will be wiped out.
So the bankers must surrender their preferential position for a time, or be wiped out.
The hard-backed currency is going to happen one way or another, because global trade cannot reliably happen without it, and small localized trade will not accept 'foreign' (nonregional) collateral of dubious provenance.
I expect wars to break out over exactly how high PMs must be revalued to, to be high enough for a reset.
ECB jawboning just like the FED with interest rate hikes. If it doesn't actually happen it probably won't....tired of this shitshow and the actors involved. Ready for the truth to come out and this ponzi to collapse.
Patience, young man. You may have a long time to wait. Make preparations and live your life as usual until that day comes. If you keep thinking it's going to happen in a matter or days or weeks you'll burn out long before it happens.
Years back on here Cognitive Dissonance wrote a series of articles called "Perhaps not a crash but a crumble" where he compared the "collapse" to an old farm building slowly rotting away by the roadside. Year after year you drive by and it doesn't look much different desipte water damage and termites slowly eating the place from the inside. Then, one day, you drive by and it's finally collapsed. But that's long after you've cared about the building and long after you've stopped wondering when it would collapse.
More QE? What a surprise!
/s
Looks like the nuclear scientists....just put their 2 cents in.
The Futures So Bright..........I've got to Wear Shades.
https://www.youtube.com/watch?v=8NZKLZmz4kA
Moar jew boning ,,, balh blah blah ....need another hit....blah blah blah....
I have to say i'm impressed that all the feins have to do is whine and everything is AWSOME AGAIN !!!!!!!
Free crack Thursday..
We just keep giving all our wealth to the top .01 percent and I'm tired of it. I'm tired of looking at a pay stub that is missing 40% of what I earned because it's going to other people. Taking "tax obligations" out first before you get paid is the most devious government plan to date. Even God expects his 10% after it goes through your hands first. No more QE, no more theft. I should be mad as hell instead of just tired.
This will they or won't they raise rates song and dance is very,very long in the tooth. All the players know "they" will not... this year or next.
So it's time to switch to a new sheet of music and the NIRP score is now in play.
MOAR & NIRP from here on out!
This will they or won't they raise rates song
If they do....it will be whole different landscape then we're looking at right now.
In a parallel universe.....maybe.
We might even see some effects of climate change....boy wouldn't that be something.
A word I don't use much in conversation but one I find I'm using more and more in describing these academic fuckwits is fuckwits. Fucking pathetic doesn't even begin to describe them.
DavidC
I disagree. The real fuckwits are all of US who have allowed this to go on for as long as it has, and still goes on to this very day, while they get richer and we get poorer.
Let's call a spade a spade - this is not "verbal intervention", this is criminal manipulation as defined by the Securities Act of 1933.
A Central Bank is allowed to "intervene" in currency markets by purchasing or selling in such markets, be it cash or derivatives.
A journalist making a statement that triggers an algo owned by a fiduciary (any money manager) that causes a securities price to rise without corresponding trading volume and direction to justify it is CRIMINAL ACTIVITY as defined by the SEC.
All you need is a trail of evidence, if it exists. All communications made by said jornalist in the prior 48 hours. After all, he is apparently moving markets with his "news" so it has to be looked into. Who did they speak to?
FBI or CIA would find out in a hurry, if this system was an honest one and the SEC actually followed its own mandate and laws.
And stop calling it "algos" as if some computer is responsible for the criminal activity. Sound like the MSM. Then again, everything that involves market commentary eventually becomes MSM. It is a Rubin world after all.
More Central Bank intervention and market rigging. As a result, investors have no idea what the actual value of assets should be.
hey Tyler, how bout you FINALLY stop using "QE" term and start naming it like it is "money printing".
by saying "QE" you help their shady cover up.
LOL, endless printing to get more money to their bankster buddies.
They flood Europe with middle easterners to change Europe completely.
Germans are still spinning not understanding what Merkel has done to them.
Watch bank profitability to know the level of consumer defaults.
Banks can charge their own rates independent of the Fed. When their profits are down, while some may attribute it to Fed policy, the fact is that it indicates their loan business is in trouble.
When banks loan business is in trouble, raising rates will kill it, causing bank runs, mass deflation, and ultimately currency collapse.
You'll have no rate rise for the forseeable future.
Presuming I am right about the underlying cause of the economic malaise sinc 2008...being that the accumulated interest from mass debt to back currencies has exceeded the real economy's means of servicing it (a.k.a. the banking sector parasite grew too large for the host to support), then QE will come again not just to Europe, but all places...and the US specifically.
I PREDICT QE4 NO LATER THAN END OF APRIL 2016.