Overnight Sentiment: The People Demand A Bailout #POMOList

Tyler Durden's picture

Well, risk is on. Not so much because of the ECB, or BOE, both of which did nothing, but because everyone is hoping and praying that in two weeks the Princeton professor will unleash the 4th round of quantitative easing in the US (yes, Twist was a flow-shifting operation and thus QE3). And the reminder that China is not immune, and did its first rate cut since 2008 only validated the realization "that they have every idea just how bad it is", as Cramer would say. Sure enough, risk is ripping, although considering the world's 2nd largest economy just joined the monetary easing pants party, the 10 point ES response is oddly subdued. Where the reaction is yet to manifest itself is in gold: we expect the PBOC will take a little longer before it announces its meager 1000 tons of gold holdings have at least doubled following 100 ton/month gold imports as recently announced. But announce it will. In the meantime, China's aggressive step likely means that unless we get a global coordinated intervention at 9 am today, as was the case on November 30 after the last notable move by the PBOC, which was the first reserve cut also since 2008, there will be none this time around and Bernanke will be on his own. God save the markets if he does not deliver, either today at the JEC testimony at 10 am or at 2:15 pm on June 20, as the S&P has now priced in at least 75 points of NEW QE intervention.

More from BofA:

Market action

Global equity markets continue to enjoy a risk-on rally. Today's risk-on rally was sparked by Fed Vice Chairman Janet Yellen's speech last night that sounded very dovish. Overnight, all of the Asian equity markets we cover, except the Shanghai Composite (-0.7%), finished higher. The best performer was the Korean Kospi, which rallied 2.6%. Both the Japanese Nikkei and the Indian Sensex finished 1.2% higher, while the Hang Seng finished up 0.9%. 

In Europe, equities are up 0.5% in the aggregate. Part of the rally in Europe is due to increased speculation that the BoE will enact more QE at today's monetary policy meeting. Shares in London are up 0.7%. At home, futures are pointing to a 0.2% increase in the S&P 500, which follows the 2.3% gain recorded yesterday. 

In bondland, Treasuries are bid after yesterday's sell-off. Currently, the 10-year yield is down 3bp, to 1.63%, while the long bond's yield is 4bp lower, at 2.70%. In Europe, German bunds and UK gilts are trading flat, while yields on Spain's 10-year are down 9bp, to 6.14%. 
The dollar is weakening against a basket of other major currencies. The DXY index is 0.1% lower. Commodities are trading modestly lower. WTI crude oil is trading at $84.64 a barrel and gold is currently selling for $1,615.03 an ounce.

Overseas data wrap-up

Strong job growth down under: Australia reported that full-time employment grew by 46,100 in May. That more than offset the weakness in April, when full-time employment contracted 18,000. The unemployment rate ticked up to 5.1%, as expected, from 5.0%, but a big part of that increase was due to the increase in the labor force participation rate, which rose to 65.5%. 

Yesterday, the ECB was very much in line with our European team's expectations: no interest rate cuts or liquidity operation moves or announcements. They did, however, extend the 1m and 3m repo operations through the end of this year. That was widely expected by markets and does not change their monetary policy stance. The ECB did note that tensions (whether financial or economic) are not within its remit, but rather depend on policy-makers. ECB Head Mario Draghi quoted bank recapitalization, as well as the lack of a clear vision for the euro future, as responsible for current tensions in the sovereign and bond markets. He also argued that these tensions are responsible for downward risks to an economic outlook that is unchanged from March. As such, we think that these tensions cannot be addressed by a change of monetary policy - conventional or unconventional. Hence the ECB did not signal rate cuts or further non-conventional operations in any clear way, but linked any such moves to future developments. Our Euro area team does see a risk that the ECB lowers interest rates in September, once second-quarter GDP is released and banks have been recapped. To read more see: Euro Area Macro Watch, 06 June 2012. 

Our Euro area economists cut Italy's GDP forecasts for 2012 and 2013 on the back of our preliminary assessment of the consequences of the earthquake damages of the past few weeks. They expect the economy to contract by 1.8% this year and by a further 0.6% in 2013, below consensus estimates of -1.5% in 2012 and +0.1% in 2013. For the full report, see Italy Economic Viewpoint, 07 June 2012. 

Industrial production in Germany contracted by 2.2% mom in April, more than the 1.0% drop expected by consensus. In addition to the weakness in April, March's figure was revised lower, to +2.2% mom from the previously reported +2.8%. Overall, this is a disappointing report and implies downside risk to second-quarter GDP. Production in April was 1.0% below the Q1 average, and that was before the recent Euro symptoms flared up: Greek exit and Spanish banking system worries.

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maxmad's picture

There will be none!  The QE-hopium crowd will get wiped out and the dollar will be worthless!  HOW DO YOU LIKE ME NOW?

dannyboy's picture

Exactly, all those record gains of yesterday are about to be the losses of today.

Timberrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr.

rajat_bhatia's picture

http://www.bloomberg.com/news/2012-06-05/europe-s-crisis-sees-vulnerable-losing-aid-to-bailed-out-bankers.html

 

 Love this, Evolution at its finest. A soft hearted idiot like me will no doubt go extinct soon, The world will be run by the Wolves, as it should, Animal Instincts at its best. Bail out the powerfull, the decievers, the thugs, the looters, Excellent lesson in Evolution! Darwin would be so proud to see whats happening

 

Hugh_Jorgan's picture

As a member of the indomitable human race I reject the pain of reality. I will not accept any. Ben, if you tell me that rigging the stock market and debasing the USD are the only things that will prevent pain, then I demand you do them!

Oh wait, what???

rajat_bhatia's picture

http://www.bloomberg.com/news/2012-06-05/europe-s-crisis-sees-vulnerable-losing-aid-to-bailed-out-bankers.html Love this, Evolution at its finest. A soft hearted idiot like me will no doubt go extinct soon, The world will be run by the Wolves, as it should, Animal Instincts at its best. Bail out the powerfull, the decievers, the thugs, the looters, Excellent lesson in Evolution! Darwin would be so proud to see whats happening

 

#Sarcasm

Loco Vida's picture

Praying there be no QE so the POG will drop like Clintons pants with Lewinski

TJ00's picture

But would POG drop? Remember no QE = the unravelling of ALL paper assets as counterparty risk is realised, this will include the gold and silver shorts and remember Exter's Pyramid?

doggis's picture

mad max has it correct. THERE WILL BE NONE!  too much talk, too many on one side of trade ~ TOO MUCH QE-HOPIUM! equity markets are too high, commodities still too high, we are in an election year.

to surprise the market, you must first UNTRAIN the market of expectations. we are in the UNTRAINING phase.

FL_Conservative's picture

Exactly, Dog!  Carve it in stone NOW!  NO QE......until Satan feels that there is no other choice.  But that is at least 500-600 pts on the S&P from now.

midgetrannyporn's picture

i insist the @federalreserve give me a bath salt bailout bitchez!

valley chick's picture

why do QE when rumors are working just fine at pumping up the market?

firstdivision's picture

Okay, so England is going to continue QE, China cut rates, the ECB will be printing.  All we need now is Ben to print or the LOLlar will be at 85 in short order. I wouldn't be short DXY today.

RobotTrader's picture

Wow, lots of "experts" like Richard Russell and Louise Yamada turned into complete fools once again.

They became bearish after the market was down 14 weeks in a row and the NYSE Summation Index had collapsed by 1850 points and interest rates were pushed to world record lows.

They never seem to learn.

Bernanke is a genius.

"Animal Spirits" brought on by extended periods of ridiculously low interest rates cannot be discounted.

And TPTB is not stupid enough to let the system enter a "Total Collapse" as predicted by all the doom-sayers at KWN.

valley chick's picture

stopped reading when I got to Bernanke is a genius. 

LongSoupLine's picture

Stopped reading when I got to "robotrader".

eclectic syncretist's picture

LOL! 

These large gap opens two days in a row need to be filled on the way back down.  I'm looking for a squeeze to take out the stops (can't safely put those in anymore with the bots gone wild) and spy gets to perhaps 133, but more likely 132.8 before we start hitting a hard wall and then getting beaten back down.  They can issue all the debt and buy all the bad mortgages they want but earnings and employment are going in the tank like it or not. Good day to buy some puts going out a month or two.

Short squeezes are exciting when you're not overlevered. 

firstdivision's picture

Forcing a squeeze != genius

slaughterer's picture

Word is: (short) sell everything at 11:00am today.  

crawl's picture

Fed has to deliver else the front running markets have some wrenching dip. This will not be tolerated, let alone allowed in the central planner ways of today.

My bet is B follows the Chinese move before his 10 AM coffee and donuts meeting with some other folks.

ArkansasAngie's picture

Obama can't ... won't ... stand for anything else/less

Staus Quo to the moon.

Disenchanted's picture

 

 

 

Twist and Shout bitchez....

 

Well, shake it up bennie now
Twist and shout
Come on, come on, come, come on bennie now
Come on and work it on out
Well work it on out, honey
You know you look so good
You know you got me goin' now
Just like I know you would

Sleepless Knight's picture

Its amazing how stocks just react to bailout news/money printing - company performace sure takes a back seat these days. I'm staying out of the market and stacking, might not be the best answer, but it sure makes me feel better.

azzhatter's picture

I am hoping for QE and Cramer dies in a masturbatory fit

eclectic syncretist's picture

QE won't be announced when the market is screaming higher, even if it is a short squeeze.

Offthebeach's picture

I see Cramer as more of a in a S&M club bondaged up to a restraint with a beat off funnel taped to his mouth type of guy. Years ago Corzine paid for him to have a clit like nib dick, so no SEC action.

Offthebeach's picture

This the new normal. There will be more QE/Twist/New until moral improves. Sheeplezens are passive, power factions are cooperative., regeme change to timd Romney that knows we are all one big corporation like the CLDS, LLC, Delaware. Sheeplezens should be happy. A new future is being planned for us to experience with easy low financing and lease roll over to youths upon initial sheeplezen final recall program, o Cash For Gramps.

vh070's picture

There's just too many twists in this financial world; I can barely keep up.