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Futures Jump After Friday Drubbing, Despite Brent Sliding To Fresh 11 Year Lows, Spanish Political Uncertainty

Tyler Durden's picture




 

In a weekend of little macro newsflow facilitated by the release of the latest Star Wars sequel, the biggest political and economic event was the Spanish general election which confirmed the end of the PP-PSOE political duopoly at national level, with Rajoy's leading block losing the absolute majority it had enjoyed since the last elections while rewarding the anti-austerity Podemos and the liberal Ciudadanos party, who between them took 109 seats in the 350-member parliament. As a result no clear governing majority emerged.

But the main surprise was the extent of the underperformance of liberal-reformist Citizens relative to opinion polls. This changes the post-election scenarios – a center-right coalition cannot reach a majority – and injects even greater political uncertainty. This is  unlikely to be a positive development for markets.

“The [Spanish] election outcome failed to provide us a clear picture of who will take power,” said Anders Moller Lumholtz, chief analyst with Danske Bank in Copenhagen. “It is likely to take time before we get clarity, and uncertainty is not a friend of the market. ECB QE buying could cushion some of the knee-jerk reaction, but as Monday is the last day before the QE goes on pause we probably shouldn’t expect much effect from that side.”

As a result, there was some early underperformance in SPGBs and initial equity weakness across European stocks, which however was promptly offset and at last check the Stoxx 600 was up 0.4% to 363, even as China's Shanghai Composite surged +1.8% with sentiment supported by the PBoC injecting CNY100 billion of funds into the interbank market, and US equity futures were up nearly 1% after Friday's oversold drubbing.

In other key news, the commodity slide continues with Brent Oil dropping to a fresh 11-year low as futures fell as much as 2.2% in London after a 2.8% drop last week.

This is where markets are right now:

  • S&P 500 futures up 0.9% to 2011
  • Stoxx 600 up 0.4% to 363
  • FTSE 100 up 0.6% to 6091
  • DAX up 1.5% to 10762
  • German 10Yr yield up 1bp to 0.56%
  • Italian 10Yr yield up 2bps to 1.59%
  • Spanish 10Yr yield up 9bps to 1.79%
  • MSCI Asia Pacific up less than 0.1% to 130
  • Nikkei 225 down 0.4% to 18916
  • Hang Seng up 0.2% to 21792
  • Shanghai Composite up 1.8% to 3642
  • US 10-yr yield up 1bp to 2.21%
  • Dollar Index up 0.07% to 98.77
  • WTI Crude futures down 0.8% to $34.45
  • Brent Futures down 0.7% to $36.61
  • Gold spot up 0.6% to $1,072
  • Silver spot up 1% to $14.24

A closer look at regional markets shows Asian stocks trading mixed as stocks shrugged off Friday's lacklustre close on Wall St. Nikkei 225 (-0.4%) underperformed albeit off worst levels amid JPY weakness, which pared earlier Toshiba led losses, while gains in energy name WorleyParsons, offset the healthcare sector pressure in the ASX 200 (+0.10%). Shanghai Comp. (+1.8%) traded higher with sentiment supported following reports that regulators approved the first cross-border mutual funds and the PBoC injecting CNY 100 bln of funds into the interbank market. JGBs finished marginally lower with trade lacking any significant price direction ahead of the holiday season, while the BoJ were in the market to purchase JPY 1.08trl in government bonds. Elsewhere, USD/CNH fell after the PBoC firmed the reference for the 1st time in 11 days. Finally, heading into the European open, JPY saw a bout of weakness as risk sentiment picked up.

Top Asian News:

  • Yuan Crunch Spurs Banks to Hoard Abroad as China Curbs Outflows: Lenders from H.K. to London sell certificates of deposit
  • Kuroda Sparks a Bond-Market Rally and Keeps His Powder Dry, Too: 2-year JGB yield falls to record
  • Stevens Gets Aussie Christmas Wish as Westpac Sees Jawboning End: RBA Governor declines to nominate weaker level for currency
  • Rajan’s 2015 Rate Cuts Offer No Cheer for Bonds Battered by Modi: Record govt borrowing plan, Fed rate bets capped gains
  • Packer Quits Crown Board, Raising Expectations of Offer: Standing aside gives him freedom to mount bid
  • Toshiba Sees Record $4.5 Billion Loss, Plans More Job Cuts: Plans up to 6,800 job cuts in segment for TVs, PCs, appliances
  • Taiwan’s Nov. Export Orders Fall 6.3% Y/y; Est. -5.3%
  • BOJ: Japan Output Gap Shrank to -0.44% in 3Q from -0.67% in 2Q

The week has kicked off with much of the focus in Europe on the Spanish elections and, as such, has seen notable underperformance in Spanish asset classes . The Spanish election results failed to provide an outright majority, with the Spanish Popular party likely set to try and form a coalition. However, this remains a particularly difficult task with the second place Socialist party seemingly unwilling to enter such a deal. In terms of the market fall out, the IBEX resides in firm negative territory (-1.70%), while Euro Stoxx (+0.80%) resides in the green to pare some of the losses seen on Friday.

In line with the underperformance in the IBEX, the SP/GE spread is wider by 8.7bps this morning, while the 10yr yield resides near November highs. Bunds have pared opening losses to now trade flat with analysts suggesting that the initial move lower in German paper was amid thin volumes and no significant fundamental factors that would warrant testing notable support levels to the downside. Elsewhere in fixed income markets, Gilts marginally outperform their

Top European News:

  • Banks to Face Tough Loss-Absorbing Requirement: Europe’s largest banks may need to build up more loss-absorbing capacity under EU rules, Single Resolution Board President Elke Koenig says
  • Syngenta Advances After ChemChina Said to Improve Takeover Offer: ChemChina offered to buy 70% of Syngenta now, with option to acquire remaining 30% later, according to people familiar.
  • TeliaSonera to Exit Nepal in $1 Billion Ncell Sale to Axiata: Co. sold its stake in Nepalese phone carrier Ncell to Axiata Group for more than $1b in move to retrench in core mkts
  • French Grocer Casino Rejects Block’s Claims as Quarrel Escalates: “Casino strongly rejects all arguments put forward by Muddy Waters Capital,” co. said earlier today.
  • Santander Buys Portugal’s Banif for $163m Amid Resolution: Acquisition is chairman Ana Botin’s first since taking over last year
  • Germany Nov. PPI -2.5% y/y vs survey -2.4%
  • Netherlands Nov. housing price index +3.8% y/y

FX markets have seen a relatively subdued start to the week, with touted light volumes due to Christmas seeing relatively limited price action. However the European session has seen the USD move higher gradually, with EUR and GBP paring their modest overnight gains against the greenback. BoE's Weale said that further downward pressure on inflation and a 'pause' in wage growth means there is less urgency for the BoE to raise rates.  UK interest rates could stay low for even longer because of David Cameron's referendum timetable, economists have warned. The in-out referendum looks likely to be held in June or September — close to when the BoE, is expected to start raising rates.

Fed's Powell (voter, hawk) stated that the Fed rate lift-off should be seen as a vote of confidence in the economy and that gradual small hikes would be the correct action to take, but also added a return to zero is possible if conditions change. Fed's Williams (voter, hawk) said that every meeting is live in regards to a possible rate increase and that he expects 4 further hikes in 2016 which is inline with what Fed members forecast. Fed's Lacker (voter, hawk) stated that public thinking should be that a rate increase could occur at any meeting and that he is in favour of decreasing the Fed's balance sheet ASAP.

In commodities, Brent continued to see weakness in early European trade, however now trades off 11 year lows reached overnight and has been gradually grinding higher towards the North American crossover . WTI has also continued its recent trend of weakness however is currently trading off recently-reached 6 year lows. Gold trades higher (USD + 6.20) amid no new fundamental news following last weeks Fed hike in line with a relatively flat USD Index (+0.10%). Elsewhere, copper prices held Friday's highs amid prospects of further output cuts from Chinese smelters, while Dalian iron ore futures rallied around 4% alongside a continued recovery in steel prices.

There is no tier 1 data scheduled for release today ASIA

* * *

Top Global News

  • Spain Uncertainty Looms as Rajoy Has First Shot at Governing: PM Mariano Rajoy’s People’s Party lost 1/3 of its seats while still beating out Socialists to take most votes, earning first shot at forging a govt
  • Panasonic to Pay $1.5b for U.S. Fridge Maker Hussmann: Co. buying U.S.-based maker of refrigeration systems to bolster housing operations, move further away from consumer electronics
  • Nomura Said to Seek Stake in American Century for $1b: Nomura plans to pay ~$1b for stake of ~40% in U.S. money manager American Century Investments, according to people familiar
  • Shire to Offer GBP8b Cash in Baxalta Bid: Sunday Times: As much as 40% of offer may be cash after little progress made on all-share bid made 5 months ago
  • Goldman Fund Said Buying $750m of Debt for Petco Takeover: Fund agreeing to buy bonds that will help finance deal for Petco Animal Supplies by CVC Capital, Canada Pension Plan Investment Board, according to a person familiar.
  • ‘Star Wars’ collected $238m in U.S. and Canadian ticket sales, topping $208.8m hauled in by Universal Studios’ “Jurassic World” in June, market researcher Rentrak says
  • Brent Oil Slides to 11-Yr Low as Producers Seen Worsening Glut: Futures fell as much as 2.2% in London after a 2.8% drop last week.
  • Amazon Said to Mull Leasing Planes to Control Delivery Chain: Co. considering leasing 20 Boeing Co. 767 freighter jets to help gain more control over delivery methods, costs, according to a person familiar.
  • China Loses Another Economic Indicator as Minxin Suspends PMI: Publishers of China Minxin PMI said they will stop updating that gauge to make “major adjustment” to their calculations
  • FIFA Panel Bans Blatter, Platini From Soccer for 8 Years: Blatter was fined CHF50,000, Platini fine CHF80,000, adjudicatory chamber of FIFA’s Ethics Committee said earlier

Bulletin Headline Summary from Bloomberg and RanSquawk

  • The week has kicked off with much of the focus in Europe on the Spanish elections and, as such, has seen notable underperformance in Spanish asset classes
  • FX markets have seen a relatively subdued start to the week, with touted light volumes in the run up to Christmas
  • No tier 1 data scheduled for release today
  • Treasuries little changed, curve flattens in quiet trading, as Christmas holiday and year-end approaches; Brent crude tumbled to lowest level in 11 years while Spanish bonds slid after an indecisive election.
  • Spanish voters rewarded the anti-austerity Podemos and the liberal Ciudadanos party, who between them took 109 seats in the 350-member parliament, no clear governing majority emerged
  • Germany said too early for Merkel for call Rajoy as standard practice is to congratulate election victors after new government is in place and that’s not the case yet in Spain, German government spokeswoman Christiane Wirtz said
  • China’s leaders intend to boost the deficit and make monetary policy more “flexible,” according to a statement from a meeting of top economic policy makers, in a sign the government is preparing more stimulus
  • Publishers of the China Minxin PMI said they will stop updating the gauge to make a "major adjustment’’ to their calculations, dealing a second setback in recent months to investors looking for an early read on the economy
  • The offshore yuan climbed for a second day, after the PBOC raised its fixing for the onshore currency for the first time in two weeks
  • Sovereign 10Y bond yields higher. Asian stocks mostly higher, European stocks and U.S. equity-index futures gain. Crude oil lower, gold and copper gain

US Event Calendar

  • 8:30am: Chicago Fed Nat Activity Index, Nov., est. 0.2 (prior -0.04)
  • 11:00am: U.S. to announce plans for auction of 4W bills
  • 11:30am: U.S. to sell $28b 3M bills, $26b 6M bills

DB's Jim Reid concludes the overnight and weekend event wrap

As our in-house expert Marco Stringa pointed out in his overnight note, the Spanish general election confirmed the end of the PP-PSOE political duopoly at national level. But the main surprise was the extent of the underperformance of liberal-reformist Citizens relative to opinion polls. This changes the post-election scenarios – a centre-right coalition cannot reach a majority – and injects even greater political uncertainty. This is unlikely to be a positive development for markets. Overall the main risk remains political impasse due to the unprecedentedly fragmented parliament. Even if a new government is formed the DB economics team here doubt it would last the full legislature. The note provides a timetable and the mechanics of government formation. Avoiding chronic politically uncertainty will become increasingly important.

Asian markets are a bit of a mixed bag this morning with the Nikkei (-3.1%) largely following the US lead on Friday but equities in Greater China generally doing better. Japanese markets are weaker in response to some confusing signaling from the BoJ on Friday after initial hope it would herald in fresh easing. The BoJ issued a statement saying it would start buying longer dated JGBs and would buy an additional JPY300bn of equities a year however Kuroda later said that these changes were no more than a technicality and does not represent additional easing.

Back to China, the Shanghai Composite (+1.4%) and Hang Seng (+0.27%) are up on the day as we type. The Shanghai Composite is up at a 3 week high led by property developers and consumer related stocks. It is an old theme but SOE reforms in China seem to be a renewed focus overnight. Asian credit spreads are weak with the iTraxx index 3bp wider on the day and IG corporate cash spreads also modestly wider across the board.

Recapping Friday’s session briefly now. The fall in US equities coincided what was again another bad day for commodities. Brent and WTI were down -0.49% and -0.63%, respectively. For the record the pair are down by another -1.44% and -0.58% overnight as we go to print. Brent is now trading at an 11-year low for the first time this cycle. The decline in S&P 500 on Friday was pretty broad based with all ten major sector groups finishing the day in the red. Losses were led by Financials (-2.5%), IT (-2.0%) and Consumer staples (-1.8%). Credit spreads also drifted wider with CDX IG and HY index +1bp and +6bp wider, respectively.

Looking at this week’s holiday shortened calendar now. Of note in the European session this morning will be the latest German PPI and Euro area consumer confidence data. In the US this afternoon the November Chicago Fed national activity index reading is the sole release there. Turning to Tuesday the early interest out of Asia will be China’s conference board leading economic index for November. In the UK we’ll get the latest public sector net borrowing data out of the UK along with German and UK consumer confidence data. In the US the main interest will be on the third reading for Q3 GDP (expected to be revised down to +1.9% from +2.1%), while also expected are existing home sales for November and the December Richmond Fed manufacturing activity print. Wednesday kicks off in Japan with the BoJ minutes from the November meeting. In France we get the final Q3 GDP print and consumer spending report. We’ll also see the third Q3 GDP read for the UK. In the US the main focus will be on the preliminary November prints for durable and capital goods orders (both expected to weaken) while the November PCE core and deflator readings will also be important to watch out for as well as personal income and spending. November new home sales data is also due along with the final December University of Michigan consumer sentiment print. There’s no data of note in Asia or Europe on Thursday, while initial jobless claims are expected in the US. We close the week on Friday with a bumper set of data in Japan including CPI, the jobless rate, PPI, leading index and housing starts.

 

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Mon, 12/21/2015 - 07:59 | 6948250 crackerjack_finance
crackerjack_finance's picture

The Fed was actually more hawkish than expected, thus driving the market turmoil/volatility...

http://crackerjackfinance.com/2015/12/the-fed-awakens-creates-negative-g...

Mon, 12/21/2015 - 08:17 | 6948277 VinceFostersGhost
VinceFostersGhost's picture

 

 

 

Haven't heard from our $150 oil guys....you guys doing OK?

 

Sent a tin of popcorn to the PPT for Christmas....thank's for all your hard work.

Mon, 12/21/2015 - 08:52 | 6948343 Dead Canary
Dead Canary's picture

They are hanging out in a bar with the $600 gold guys.

Mon, 12/21/2015 - 09:11 | 6948376 VinceFostersGhost
VinceFostersGhost's picture

 

 

I was a $600 gold guy back when gold was $256.

 

I even thought gold might hit $1000....boy did I catch hell for that.

Mon, 12/21/2015 - 08:31 | 6948304 Perimetr
Perimetr's picture

Futures jump when the banksters at the Central Banks tell them to. 

It has nothing to do with the bullshit published by the MSM, that is only to keep the unwashed masses confused until the temple comes crashing down.

Mon, 12/21/2015 - 09:00 | 6948351 eclectic syncretist
eclectic syncretist's picture

Perhaps they left for vacation early this year, with the standard Santa Claus Algorithims running the show for a couple more days this time around.

Mon, 12/21/2015 - 09:43 | 6948445 Arnold
Arnold's picture

Bonus Time

Bonus Time

Its Bonus Time this year

Got three days to make it pay

Before the Grinch gets here..............

 

--From A Hedge Fund Christmas.

Mon, 12/21/2015 - 08:12 | 6948252 Cognitive Dissonance
Cognitive Dissonance's picture

"All fixed. Ignore those lousy economic numbers behind the curtin. I am the wizard of the Fed." - Minion Yellen

Mon, 12/21/2015 - 10:27 | 6948602 DeadFred
DeadFred's picture

Whose gonna keep keep thems rebels in line up yonder in Barcelona if'n der's no one mindin' da shop?

Mon, 12/21/2015 - 08:00 | 6948258 Devotional
Devotional's picture

Another bank was Bailed out in Portugal this weekend, BANIF is the name. ZH did not mention it.

Anyhoo ...

Mon, 12/21/2015 - 08:23 | 6948288 VinceFostersGhost
VinceFostersGhost's picture

 

 

Portugal, Greece, Spain......whatever.

 

Who isn't getting bailed out over there.....cause that would be news.

Mon, 12/21/2015 - 08:01 | 6948260 Peter Pan
Peter Pan's picture

Is this really a rebound or is it a death spasm?

I mean WTF? How many times can they try jump starting a carcass before admitting the stench of gangrene?

Mon, 12/21/2015 - 08:02 | 6948261 nmewn
nmewn's picture

Can't-Stop-Laughing...

"The government in the Netherlands has clarified that it is legal for driving instructors to offer lessons in return for sex, as long as the students are over the age of 18.

However, it is illegal to offer sex in return for lessons.

Transport minister Melanie Schultz van Haegen and Justice minister Ard van der Steur addressed the issue in response to a question tabled in parliament by Gert-Jan Segers of the socially conservative Christian Union party, noting that, although ‘undesirable’, offering driving lessons with sex as payment is not illegal."

...because it's not the thing being used for payment, it's the order in which the payment is processed that matters ;-)

Mon, 12/21/2015 - 08:07 | 6948267 NoDebt
NoDebt's picture

Wonder if you still have to pay sales tax on that.

Mon, 12/21/2015 - 08:25 | 6948295 VinceFostersGhost
VinceFostersGhost's picture

 

 

Not in Sweden....and your driving instructor can be 14 years old.

Mon, 12/21/2015 - 08:11 | 6948273 Cognitive Dissonance
Cognitive Dissonance's picture

"...because it's not the thing being used for payment, (sex) it's the order in which the payment is processed that matters"

So does the sex come before or after the driving lessons? Or maybe it is on the installment plan? If the lessons are given but then the sexual payment is withheld, does the driving instructor take the person to court for non payment? Does the driving instructor produce a receipt and is that 'payment' then taxed as ordinary income or capital gain?

So many questions, so little time.  :-)

Mon, 12/21/2015 - 08:19 | 6948282 Who was that ma...
Who was that masked man's picture

Perhaps the driving instruction and the sex are accomplished simultaneously although it is probably best to not go into the details of that.

Mon, 12/21/2015 - 08:29 | 6948301 Ghordius
Ghordius's picture

you could as well ask why in Sweden it's a criminal act to buy sex... while at the same time who offers sex for money is a victim, pure and simple

inversely, you could ask yourself how it is that in Sweden two gals can have a chat, find out they both had sex with Julian Assange, then claim to have been raped by him, and the judge does not even blink

Assange is still in London, still fleeing extradition to Sweden for that case. which in the Swedish criminal statistics of that year is counted as a two rapes already

Mon, 12/21/2015 - 08:09 | 6948271 NoDebt
NoDebt's picture

Stay the hell outta the markets until QE4 is announced.  And it better be twice the size of the last one.

Mon, 12/21/2015 - 08:23 | 6948291 Callz d Ballz
Callz d Ballz's picture

Wonder what clever name the Fed will give the next QE? Can't be 4...
Maybe Operation Till Next Time?

Mon, 12/21/2015 - 08:29 | 6948302 back to basics
back to basics's picture

Yeah, but that's not until mid 2016, why not enjoy the ride down until then? There is no upside to this market now, none. The wallpaper is peeling off exposing the rot in the global economy and the FED's hike will be felt somewhere sooner or later.

Unless of course you think they will announce QE4 without the stock market taking a dump first. It doesn't make sense, does it?

Mon, 12/21/2015 - 08:24 | 6948293 Cognitive Dissonance
Cognitive Dissonance's picture

This was posted on ZH last week. What really surprised was the very small size of Silver relative to everything else. Does that mean there is hope for Monster Boxes everywhere?

Mon, 12/21/2015 - 08:22 | 6948289 Ghordius
Ghordius's picture

here another example of what so often irks me in English speaking media in general:

"the biggest political and economic event was the Spanish general election which confirmed the end of the PP-PSOE political duopoly at national level, with Rajoy's leading block losing the absolute majority it had enjoyed since the last elections while rewarding the anti-austerity Podemos and the liberal Ciudadanos party, who between them took 109 seats in the 350-member parliament. As a result no clear governing majority emerged"

the PSOE is socialist, it's in the very name of the party. the author correctly identifies Ciudadanos as liberal

but the PP... will not be identified as conservative party. blast me, somehow every media that talks English, even "fringe media" has a kind of huge problem at ever identifying other people's parties as conservative

it does not matter if it's Spain's Rajoy, Italy's Berlusconi, France's Sarkozy, Germany's Merkel, Hungary's Orban, and so on, up to Russia's Putin

is that a... conspiracy? one of those that are unleashed on kids, like "Santa exists"? is it so that it rhymes better with "europe is socialist"?

merry Christmas, btw

Mon, 12/21/2015 - 08:35 | 6948309 VinceFostersGhost
VinceFostersGhost's picture

 

 

"europe is socialist"

 

In Europe the conservitives are socialists.

Mon, 12/21/2015 - 08:42 | 6948325 Ghordius
Ghordius's picture

exactly. that meme. this constantly reinforced message. about blokes that - gasp! - among other things are for balanced budgets

but don't use those words, the meme is that "they refuse to allow sanity"

Mon, 12/21/2015 - 08:28 | 6948300 wmbz
wmbz's picture

2016 will be NIRP year!

Mon, 12/21/2015 - 08:41 | 6948320 THE DORK OF CORK
THE DORK OF CORK's picture

Biggest energy story of the OECD.

Australia 

Nat gas consumption down 40.5 % in September ,  -17.5 % (Jan -Sep)

Exports up 12.7 % (Jan -Sep)

 

LNG exports driving up domestic prices ?

Mon, 12/21/2015 - 08:48 | 6948336 MFL8240
MFL8240's picture

Exactly as one would have expected.  You know ahead of time what this group will do, its totally predictable.

Mon, 12/21/2015 - 09:00 | 6948354 THE DORK OF CORK
THE DORK OF CORK's picture

Australia n nat gas production also down 2.4% (Jan to DEC)

Down 10.6 % in September .

Exports up 24.3 % in September.

 

Oz gas turbines shutting down ?

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