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Global Stocks, US Futures Greet Historic Fed Day With Euphoria
The day has come when the boxed-in Fed has no choice: with the vast majority of the market expecting a rate hike, Yellen has to deliver or suffer a crushing confidence blow like no other. And deliver she will, with expectations that said hike will be "as dovish as possible", which however as we explained yesterday, is not really possible. For now however, the market is desperate to convince itself that just as more easing and more QE were bullish for the market, so rate hikes are just as bullish. Recall from late 2013: "tapering is not tightening," then the 2015 version of this refrain is "tightening is not tightening."
It remains to be seen just what happens after the Fed's announcement but in the last few hours before it, the surge higher in global stocks and equity futures continues as the last ounces of a "dovish rate hike" are fully priced in. Asian and European stocks, S&P futures all rise ahead of Federal Reserve’s rate decision. The Dollar is little changed vs euro. Oil, however, has held its losses after late news last night that the U.S. plans to lift the 40-year-old ban on crude oil exports, which in itself will have little impact on oil prices, but as Virendra Chauhan at Energy Aspects in Singapore says "The deal to lift the crude ban is a significant change in U.S. policy, but in terms of the near-term impact on prices, we expect that to be blotchy and sentiment driven. All that you’re doing is transferring the glut from the U.S., where most of the storage capacity is, to elsewhere in the world."
So with less than 8 hours until the Fed's historic announcement - and for the best indicator of how the market will respond to the Fed's announcement at 2pm just keep an eye on the USDJPY as it will dictate every other class, this is where we stand.
- S&P 500 futures up 0.6% to 2049
- Stoxx 600 up 0.5% to 361
- FTSE 100 up 0.6% to 6055
- DAX up 0.3% to 10484
- German 10Yr yield up less than 1bp to 0.64%
- Italian 10Yr yield down 1bp to 1.67%
- MSCI Asia Pacific up 2.1% to 129
- Nikkei 225 up 2.6% to 19050
- Hang Seng up 2% to 21701
- Shanghai Composite up 0.2% to 3516
- S&P/ASX 200 up 2.4% to 5028
- US 10-yr yield up less than 1bp to 2.27%
- Dollar Index up 0.09% to 98.31
- WTI Crude futures down 1.1% to $36.94
- Brent Futures down 2.3% to $37.55
- Gold spot up 0.4% to $1,065
- Silver spot up 0.3% to $13.83
Aside from the Fed countdown, here are some of main overnight news:
- Congress Reaches Fiscal Agreement That Ends U.S. Oil Export Ban: Plan extends solar, wind energy credits backed by Democrats
- Global Payments to Buy Heartland Payment for About $4.3b: Stock and cash deal has transaction value of $100 per share
- Pershing Square Lost 19.7% YTD, Ackman Says in Holder Letter: 3Q net redemptions totaled $39m, or 0.2% of capital
- Third Avenue Bled Managers, Billions of Assets Before Fund Shut: Assets plunged to $8b from $26b in 2006
- GE Capital Prepares to Sell Spain Credit Business: Expansion; Business mostly made up of mortgages, volume of ~EU600m
- Pichai Says Google Making Changes to Suit Non-English Speakers: Google starting program to train 2m Android developers
- Valeant CEO Said to Be on List for Drug Price Hearing: Lawmaker writes Valeant CEO threatening subpoena for documents
- Norfolk Southern Says CP Response ‘Flatly Wrong’ on Facts, Law: Canadian Pacific hasn’t sought declaratory order from Surface Transportation Board on proposed voting trust structure, Norfolk Southern says
- Constant Contact Gets SEC Subpoena: SEC seeks documents on sales, marketing, customer retention practices, disclosure of financial and operating metrics
As noted above, overnight markets were in a euphoric state, starting in Asia where stocks traded higher tracking the positive close on Wall St., following the continued rebound seen in energy prices ahead of the FOMC meeting later on today. The energy sector outperformed across all bourses, particularly in China where the sector rose by more than 6% in the Hang Seng (+2.0%) index.
Nikkei 225 (+2.6%) was led higher by telecom stocks, which were supported after Japan's communication ministry panel did not push for mobile carrier rate cuts.
“Markets had time to prepare for this day, with investors winding back risks ahead of the event,” Tim Schroeders, a portfolio manager who helps oversee about $1 billion in equities at Pengana Capital Ltd. in Melbourne, said by phone. “What happens after the Fed rate hike is difficult to tell, especially since we’re coming into a quiet period around Christmas and New Year.”
10yr JGBs traded lower as the firm risk sentiment in markets dampened demand for safer assets, while the BoJ entered the market to purchase JPY 1.1trl in government bonds.
Top Asian News
- MSCI Asia Pacific rises for first time in 7 days. The gauge lost more than 4% in the previous six sessions, reaching the lowest level since Oct. 2.
- China Growth May Slow to 6.6 Percent in 2016, Researchers Say: Chinese Academy of Social Sciences predicted “slow bull” market
- Developing Asian Bond Market Set to Top Japan as Funds Go Global: Philippines, Indonesia yield spreads widen versus Japan
- Rupee Faces Moment of Truth With $2.6 Billion Outflow Before Fed: Currency has weakened 2.4% percent since end of Oct.
- Saudi Arabia Spends Billions to Get Asia Hooked on Its Crude Oil: Aramco has invested in 3 processing facilities in Asia
- Packer Said in Talks to Take Crown Resorts Assets Private: Billionaire speaks with PE firms, pension funds on possible bid
- Piquant Hedge Fund Closes After Failing to Attract Investors: The $20m Singapore quant fund stopped trading in June
In Europe, despite opening in the green, European equities (Euro Stoxx: +0.6%) briefly slipped into the red before then moving higher again in what has been a choppy session so far. In terms of a sector specific breakdown, defensive sectors lead the way higher, namely healthcare, while the energy sector continues to outperform after WTI and Brent managed to avoid fresh multiyear lows in the wake of yesterday's build in API crude oil inventories.
Despite the early lack of direction in equity markets, with sentiment on edge today Bunds have moved higher throughout the European morning and reside in positive territory with analysts at Informa noting that bund options have been attracting some mixed put interest, while the curve steepening has slowed ahead of the FOMC decision later today. This comes after heavy losses seen in the German benchmark yesterday, and amid light supply today.
Top European News
- Julius Baer Will Buy Commerzbank’s Luxembourg Unit to Add Assets: Adds EU3b in assets under management
- Casino to Cut Debt by More Than EU2b in 2016: Plans to sell some of its real estate in Thailand and Colombia
- Rolls-Royce Culls Top Managers as East Responds to Profit Slump: CEO takes direct charge of business divided into five units
- SSAB Falls to 14-Year Low After Warning of 4Q Loss: European, North America steel volumes significantly weaker than forecast
- Carney Says Conditions for a U.K. Rate Hike Aren’t Yet in Place: U.K. is in a ‘low-for-long’ interest-rate environment
In FX markets, the USD dictated play this morning, with the greenback gaining against EUR, GBP and JPY, with levels being broken in the form of the 122.00 level to the upside in USD/JPY and 1.5000 to the downside in GBP/USD. This morning has seen a number of data points out of Europe (Manufacturing PMI 53.10 vs. Exp. 52.80) and the UK (Jobless Claims Change 3.9K vs. Exp. 0.8K), however with reactions relatively muted given the focus on the FOMC later.
Asia-Pacific hours saw the continued divergence between CNH and CNY, with analysts at Informa noting that according to Citi data, short positions in CNH fell marginally last week, while contrasting data from BofAML shows that real money names have resumed selling after a brief spell of being net buyers.
The energy complex heads into the North American crossover seeing softness across the board, with WTI and Brent both in the red on the day, with the former residing around the USD 37.00/bbl handle and the latter below the USD 38.00/bbl handle. This comes after API crude oil inventories showed a build of 2300k (Prey. -1900k) and ahead of DoE crude oil inventories later today (Exp. -1500k, Prey. -3568k).
Gold was stable overnight and trades in modest positive territory as participants remained tentative ahead of today's much awaited, key-risk FOMC decision. Elsewhere, copper and iron prices were mildly supported amid short-covering and an improvement in global risk sentiment. Finally, steel rebar futures showed some signs on stabilising overnight after the May future rose 1 %, although analysts warn that gains could be short-lived due to a lack of demand in China.
As well as the aforementioned Fed rate decision, today sees US housing starts, building permits and manufacturing PMI.
Bulletin Headline Summary from Bloomberg and RanSquawk
- European equities drift higher after early choppiness to trade in positive territory in line with their US and Asian counterparts
- USD heads into the North American crossover near intraday highs, with gains seen against GBP and JPY
- Today sees one of the biggest events of the year in the form of the Fed rate decision, with housing starts, building permits, manufacturing PMI and DoE's also scheduled from the US
- Treasuries little changed as market awaits FOMC rate decision and Yellen presser amid expectations Fed will increase interest rates for first time in almost a decade.
- Barring a shock, investors are about to find out how much stocks are worth in the absence of Fed support that has helped restore $15 trillion to share values since 2009
- Currency traders are on alert for a repeat of dollar declines that followed the start of tightening cycles in 2004, 1999 and 1994 on speculation that a boost is already in the price
- Merkel’s party colleagues expressed growing dismay at the prospect of a British exit from the European Union, with one lawmaker portraying Cameron’s planned referendum as an “existential risk” for Europe
- U.K. wage growth slowed more than economists forecast, reinforcing the case for the Bank of England to keep borrowing costs at a record-low for now
- Congressional leaders unveiled a broad package of spending and tax legislation that would avert a U.S. government shutdown and lift the 40-year-old ban on crude oil exports
- Donald Trump’s rivals still haven’t figured out how to land a fatal blow against their party’s front-runner. That was true again on Tuesday, as the New York businessman survived the latest meeting of the party’s White House contenders
- No IG or HY deals yesterday. BofAML Corporate Master Index OAS holds at +174, YTD range 180/129. High Yield Master II OAS tightens 24bp to +709 after reaching new YTD wide Tuesday; YTD low 438
- Sovereign 10Y bond yields mostly lower. Asian stocks gain, European stocks and U.S. equity- index futures rise. Crude oil lower, gold and copper higher
US Event Calendar
- 7:00am: MBA Mortgage Applications, Dec. 11 (prior 1.2%)
- 8:30am: Housing Starts, Nov., est. 1.130m (1.060m)
- Housing Starts m/m, Nov., est. 6.6% (prior -11%)
- Building Permits, Nov., est. 1.150m (prior 1.150m, revised 1.161m)
- Building Permits m/m, Nov., est. -1% (prior 4.1%, revised 5.1%)
- 9:15am: Industrial Production, Nov., est. -0.2% (prior -0.2%)
- Capacity Utilization, Nov., est. 77.4% (prior 77.5%)
- Manufacturing (SIC) Production, Nov., est. 0.0% (prior 0.4%)
- 9:45am: Markit US Manufacturing PMI, Dec. P, est. 52.6 (prior 52.8)
- 2:00pm: FOMC Rate Decision, est. 0.25% to 0.5% range (prior 0% to 0.25% range)
- 2:30pm: Fed’s Yellen holds news conference in Washington
DB's Jim Reid concludes the rest of the overnight wrap
Despite Oil markets down around half a percent this morning, bourses in Asia are following much of the strength from yesterday’s showing in the US and Europe. There are broad-based gains across the bulk of the region with +2% gains for the Nikkei, Hang Seng, Kospi and ASX. Markets in China haven’t quite been as impressive although the Shanghai Comp and CSI 300 are still up +0.71% and +0.41% respectively. Credit markets across Asia, Australia and Japan are generally 2-3bps tighter also. US politics is also attracting a bit of attention with the news that US congressional leaders have agreed on a plan that will see the 40-year old ban on crude oil exports lifted. According to the FT the new spending plan would also avoid a looming possible government shutdown. The House is due to vote on the bill on Thursday.
On another day yesterday’s data would have probably garnered more attention than it perhaps got. That being said, yesterday’s inflation numbers in the US coming in more or less in line with expectations will have given FOMC policymakers one last sigh of relief. Headline CPI for November printed at 0.0% mom which was in-line with expectations, while the YoY rate nudged up to the highest this year at +0.5% (vs. +0.4% expected), a rise of three-tenths from October as some of the energy price reductions rolled out from last year. The monthly core reading also met expectations at +0.2% mom which has helped to push the YoY rate up one-tenth to +2.0%. Meanwhile, the December Empire manufacturing reading improved to -4.6 from -10.7 in November, with the new orders and inventories components also showing improvement. Elsewhere the NAHB housing market index was down 1pt this month to 61 (vs. 63 expected) and has dipped lower for two consecutive months now.
Over in Europe we saw the German ZEW survey for December rise 0.6pts to 55.0 (vs. 54.2) with the expectations survey also up, rising 5.7pts to 16.1. Over in the UK, headline CPI was a bit better than expected last month although still at a lowly 0.0% mom (vs. -0.1% expected). The YoY rate edged up two-tenths to +0.1% while the core was up one-tenth to +1.2% as expected. Sweden also generated a few headlines after the Riksbank made no change to its current policy rate of -0.35% and its current asset purchasing program, while also coming across a bit more hawkish than anticipated in its post-meeting statement.
Looking at the day ahead, the focus in the European session this morning is set to be on the flash December PMI’s where we’ll get the manufacturing, services and composite prints for the Euro area, Germany and France. The latest batch of UK employment indicators are also expected this morning, along with the November Euro area CPI reading. It goes without saying that the focus this afternoon will be on the conclusion of the two-day FOMC meeting where we’ll get the decision at 7pm GMT. The associated dot plots and any potential revisions will be closely scrutinized, while Fed Chair Yellen’s post meeting press-conference will also be in the spotlight. Prior to this, the economic data due out in the US today includes November housing starts and building permits, industrial and manufacturing production, capacity utilization and finally the flash December manufacturing PMI.
See you all on the other side.
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Will it be a meager .25% or quantifiably moar meager .15%?
Oh be still my palpitating heart ;-)
Maybe they'll go NIRP right before Christmas and hike in Jan.
Otherwise, it could get ugly.
So I guess, this, is this the part where Moses comes down off the mountain totin' stone tablets & rocks the world of the frenzied Hebrews down below who are falling all over themselves worshipping the golden calf hewn from the gold stolen from the Egyptians? (or is my interpretation of Exodus incorrect)?
I'm looking forward to NIRP and all the dying elderly that cannot afford to eat.
"Bring out your dead."
..... anything less than .175 and Janet risks losing all her credib, never mind.
You are correct young Vendetta, my plan is to hike all the way up to a whopping .25, then cut til rates hit -2.75%, this should stop the next recession from happening. Nevermind, the current recession that never ended from 2007. As I tell my hubby Henry Fellen, "if you can't get it up, at least talk dirty to me."
I call this my "Dovish Hike", followed by my "Hawkish Cuts"
No worries. Whatever happens the Federal Reserve's Plunge Protection Team will be out in full force buying stocks to prop up the market.
No way all this insane buying is legit. It's time the Fed gets audited !!
Even so, I wonder how many Joe Six-Packs know that their index-based 401k's have actually lost money this year?
William Dudley, NY fed head, is heavily involved in manipulating the equities.
Only following orders....
Prezidents Working Group has you covered
Yo Yogi,
Rigging is not "manipulating"
Happy New Year
Trump won't beat Hillary
Hillary will be Obama times 10
No audit ever
Knock Hlllary out FIRST
Trump vs Sanders
WTF are you writing about? Do you mean that Trump will hike rates or Hillary or that Sanders will?
It's a SHIT SHOW... Its all a show that has nothing to do with the REAL economy... Hocus pocus BULLSHIT! Its all about the MESSAGE???? Fraud comes to mind. Holy fucking shit? cant people see for themselves what is going on? or do we really need the FED to spoon feed us reality? Spoon feed us the Fake Truth, so we can feel better for the moment. This is a fucking circus that cant last much longer.
"This is a fucking circus that cant last much longer".
Sadly it can and will last much,much longer.
No matter what Jack does today, printers print and they will not stop until they blow it all up.
Debt,debt and far MOAR debt, on the way!
It wont last as long as they "Think" it will. You really have confidence in these people? Keep Drinking the KOOL-AID
Yea Kool-aid all right.
Just place your bets on what you believe will come next.
The pump will keep right on pumping.
The real problem is... is the day it does stop pumping.. You dont want to be on the wrong side because your really going to get FUCKED. When the music stops there will be no chairs left. Nothing lasts forever not even this. This is nothing more than hitting the morphine button just before its over.
At this point it no longer matters so give us another Shot! If they do stimulate they are preventing the people from rising up so they can get away with changing laws in their favour to ultimately take control.
Sooo, anyways...when even Slate looks around the room and asks who farted I guess the progs are now suspecting the ObamaCare bean dip?
http://www.slate.com/articles/business/moneybox/2015/12/ppos_are_disappe...
bagel and locks for lunch at the fed...jewish bankers rest easy knowing their man at the FED leaks results before the goy ever see it. good system NO?
Lox
If you're going to insult someone's ethnicity, at least get the spelling right.
Pool you are right, it's my damn keyboard it hates crooks so bad it just miss spells ..no goyim was hurt in the making of this post.
ps "ethnicity " such a elite snob word, and a little effete..but it fits you.
Yep, ,the insiers know full well what Jack will say/do today...Because they are one in the same.
Jack may as well leave her office and go over to Goldman and make her little bullshit speach.
She'll be working there next anyway.
We are talking about only fucking 0.25% raise, we already have all these shit storm of months and months of nervousness.
Propspect of raising interest rate to normal level?? Think again.
She might tweak a ½%.
"Happy Days are Here Again!" (Ben Selvin and the Crooners, 1930)
https://www.youtube.com/watch?v=gqsT4xnKZPg
Go out an run up those credit cards so this country can flourish. Fucking nutz!
Cut the Krap sister, when are you sending the Helicopters in ?
Assad can stay, for now: Kerry accepts Russian stance
http://hosted.ap.org/dynamic/stories/E/EU_RUSSIA_US?SITE=AP&SECTION=HOME...
Russia- 3
America- 0
https://earloftaint.files.wordpress.com/2013/09/diplomacy.jpg?w=630&h=444
Pull it...
Not to worry Folks, surely Janet likes a Goldiloks happy ending here today. She's not too tight, she's not too easy, so help yourself to big bowl of "just right" and go we, we, we, all the way home.....Bitchez.
Just remember: each of us must, one day, face our own three bears.
Hut 1. Hut 2. Hut3. HiQE4
Good call.
Paul Ryan saved Government!!! Passed a great Trillion dollar budget with tax cuts for everyone but me.
I just googled the following. a .25 point isn't relevant.
Average consumer credit card rate, overall market: 17.55 percent.
Average consumer non-rewards credit card rate: 16.82 percent.
Average consumer rewards credit card rate: 17.87 percent.
Average student credit card rate: 17.04 percent.Jul 31, 2015
https://studentaid.ed.gov/sa/types/loans/interest-rates
don't forget these too
US average savings account interest rate: 0.06%
The pre-euphoria wasn't enough
This is EXACTLY what happened last meeting
Big down a few days prior, followed by bigger bounce into meeting
perception is reality.
Does that come with a pretty flowchart?
Meanwhile, here is a news story that may become quite common in 2016:
http://fuelfix.com/blog/2015/12/15/magnum-hunter-seeks-bankruptcy-amid-o...
excerpt:
Magnum Hunter seeks bankruptcy amid oil rout Posted on December 15, 2015 By Collin EatonHOUSTON — The collapse of fuel prices has claimed another Texas driller.
Magnum Hunter Resources Corp. said Tuesday it is seeking Chapter 11 bankruptcy protection, becoming the 19th oil producer in the state to file for bankruptcy since the oil bust began last year.
Cubic Energy Inc., the latest Texas oil company filed for bankruptcy protection.
Energy & Exploration Partners,
Driller becomes 18th to seek bankruptcy in Texas, so it equals 20 as of today.I'm waiting for this to hit the larger fellows. Smaller outfits have started their fall, next stop, the bigger boys with larger outstanding debt.
All rise and be amazed as the giant dusty vagina raises rates today. And the Fed prints like a mofo to cover it. Just like I said 3 months ago, for the sake of "an improving economy".
The FED has already been printing in the shadows up to a trillion per month; you can't just wait to react to planned events!? Naked short selling of Treasuries through the reverse REPO window, which is selling T-bonds without delivery, and the FED participates by the "wink wink".
However, there are more back-stops in place and the PPT wil be in full force. What I have noticed this morning is that oil is down and unless that reverses, that may be a negative sign for the market until Yeller speaks at 2:30pm. I'll wait to see if gold spikes at 8:30-9am ET, the NY open. Could be they allow the market to decline leading up the the "big" announcement, but with OPEX coming up on Friday, the S&P must close above 2050 and preferably above 2080...we will have to wait and see. Large "short squeeze".
We may see a planned sharp drop in the market next week to get people to get into bonds to mitigate some carnage. I believe that is what happen in August.
Since October, more than 55 billion in US Treasuries have come home because the EM's need USD and one reason the dollar continues and will continue to rise until the day comes when it vanishes. A day that will go down in the annuls of history, but then again war may be on the table as a sick substitute, which only delays the inevitable. All by plan.
Rates will go negative and all those bulls will get squashed, muahahahahahahah
Not this week, but perhaps next week.
You are correct young Oblama, my plan is to hike all the way up to a whopping .25, then cut til rates hit -2.75%, this should stop the next recession from happening. Nevermind, the current recession that never ended from 2007. As I tell my hubby Henry Fellen, "if you can't get it up, at least talk dirty to me."
Baghdad Janet will speak today. Nothing she says is bad for US.
Q the false flag
D-Day for Fed Fiat Credit System:https://youtu.be/v_5QBJx0Im8
The “philosophy” of large banks and investment houses is GREED. They expect the FED (read taxpayers) to continue providing unlimited amounts of ultra-cheap money for stock buybacks, continuing Wall St Bank bail outs, and cheap funds to continue loading up on junk bonds and trendy real estate. When the inevitable defaults on junk bonds takes off, bringing the over leveraged stock market and real estate down with it, TAXPAYERS will again be expected to pay for all of this.
Psychotic.