Less than impressive PMIs from Europe, as well as China failed to depress the bullish sentiment as market participants remained hopeful that a full scale bailout of Spain will take place in the very near future. As a result, in spite of opening lower, equity markets in Europe have edged into positive territory, supported by utilities and telecommunication sectors. Banks also posted decent gains, after Spanish economy minister outlined the bad bank plan which is to be financed with senior debt and private investors to have majority stake in bad bank. The bank recap plan is expected to be running by start of December. Italian markets outperformed, largely due to the fact that today’s Italian Services PMI posted a minor improvement on the previous reading. Bond yield spreads continued to tighten, however flows remained light ahead of the ECB policy meeting tomorrow, as well as the latest round of issuance from Spain and France. Heading into the North American open, EUR/USD is trading little changed as demand from Middle Eastern, as well as EU semi-official accounts was offset by risk event (ECB, auctions) pre-positioning. Going forward, the second half of the session sees the release of the latest ADP Employment Report, ISM Non-Manufacturing and the weekly DoE inventory survey.
Tonight's session has been even more boring than yesterday's, when nothing happened. Several data points came out of Europe, some better than expected, some worse, but all massively beaten down to where any uptick is merely a dead cat bounce. Retail sales in the euro zone rose 0.1 percent in August from July, when they also gained 0.1 percent. From a year earlier, sales dropped 1.3 percent. A composite PMI of manufacturing and services industries in the euro area fell to 46.1 in September from 46.3 in August, Markit Economics said. That’s above an initial estimate of 45.9. The problem is that the PMIs of the most notable countries: Germany (at 49.7 on expectations of 50.6, lowest since March 2006), France (45.0, down from 46.1, and below consensus of an unchanged print -keep a close eye on this suddenly fast-motion trainwrecking economy), Spain, UK and Sweden all missed badly. In the U.K., where the services PMI dropped to 52.2 in September from 53.7 in August. But don't call it a stagflation: it's been here for years - U.K. retail prices rose 1 percent in September from a year earlier after a 1.1 percent gain in August, the British Retail Consortium said. Some additional data via BBG - Britons injected a net 9.8 billion pounds into their housing equity in the second quarter, the Bank of England said. Elsewhere, one central bank that refuses to join the global easefest is, not surprisingly, Iceland’s central bank kept the sevenday collateral lending rate unchanged at 5.75 percent for a second meeting. None of this has been able to move the futures which are net flat with Treasuries steady, before the US ISM Services number (est. 53.4 from 53.7), the total joke of an indicator which is the ADP Employment (est. 140k from 201k) but which wrong as it always is, is the only advance hint into Friday as traders prepare for Friday’s nonfarm payrolls report (est. 115k, unemployment rate rising to 8.2%).
- No Joy on Wall Street as Biggest Banks Earn $63 Billion (Bloomberg)
- And more good news: IMF’s Blanchard Says Crisis Will Last a Decade (Reuters)
- Hobbit Returns to Find Middle Earth Has Become Expensive (Bloomberg)
- Freddie's Foreclosure Plan Hits Roadblock (WSJ)
- Who will buy the FT? Pearson CEO Scardino Will Step Down as Fallon Takes Over (BBG)
- Jeremy Lin Said to Be in Talks With Harvard on Licensing Deal (Bloomberg)
- Jon Weil tears apart the NYAG "prosecution" - Eric Schneiderman Will Have to Do Better Than This (BBG)
- Portugal Offers to Exchange Bonds as It Seeks Debt Market Access (Bloomberg)
- Is unlimited growth a thing of the past? (FT-Martin Wolf)
- European Bank Capital Results Overtaken by Tougher Global Rules (Bloomberg)
- China’s Slowdown Reverberates as ADB Cuts Forecasts (Bloomberg)
- Tokyo has no plan to extend currency swap deal with Seoul (Reuters)
While some may think that having an unelected technocrat is all fun and games, in Rome at least one person begs to differ. The person is Marcello Di Finizo, an Italian restaurateur, who has "staged a spectacular protest by spending the night between Tuesday and Wednesday on top of Saint Peter's Church in Rome." He is still there now and his expliot can be seen live on the webcast below.
The conventional validation for perpetual war in the Middle East does not hold when looked at rationally. When the ideas of nationalism and statist glory are wiped away, the state appears as it really is: institutionalized exploitation of the masses by the few. The undertaking of war masks this reality for a short period while accelerating the pace at which liberty is stripped away. In the end, wars are waged to fulfill the sadistic desires of government leaders and to give them an opening to tighten their grip on society. The parasitic class which makes up the state doesn’t just war with other states; it conducts war against the citizens it claims to protect.
Between Obama's (equity-market-driven) election odds at Intrade and IEM, WaPo's projections, and Gallup's poll results, it seems an incumbent victory is all but guaranteed - even after over-hyped video clips are distributed. Adam Parker, Morgan Stanley's erstwhile realist strategist digs through the empirical data and finds that Gallup's latest poll suggests the 2012 election will not be close. History is also on Obama's side - 10 incumbents have won while 3 (Hoover, Carter, and Bush Sr.) have lost since 1900. The trouble for equity investors is that, despite what you have been told (and we already warned) about election year cycles, the post-election incumbent-victory performance is on average a 4.5% loss over six months. So add this 'doldrum' hangover to the post-election European 'event risk', the US 'fiscal-cliff' and debt-ceiling debacle, and China's Politburo meeting on Nov. 6th and it looks like Thanksgiving can't come soon enough.
The Troika technical team was chased from their Greek offices on Tuesday by an angry mob of Muni workers (who proclaimed that "they got our labor rights and conditions back to the Middle Ages"). As KeepTalkingGreece notes, this is the third incident in 24 hours as since the team arrived they have had water bottle thrown at them as well as cars kicked and 'hurled coffees'. The clip below shows the Troika member looking rather anxious as he runs from the crowd (and NewsIt reported a female Troika member seeking refuge in a bookstore). It is not just the municipal workers who are in fear though, as GreekReporter notes the unbelievable story of the re-appearance of a 'mysterious' CD containing the names of 2000 ultra-rich Greek Swiss-bank account-holders is now back in the hands of the Greek government as they press for bilateral taxation on those huge deposits. It seems rich and poor alike are not happy with the Troika's exposure of tax cheats across the desparate nation.
In case there is still any wonder why absolutely nobody has no faith in the centrally planned house of cards that is the modern capital markets system, not retail investors, not institutional ones, not HFT vacuum tubes lately, and as of Monday, not even the Bank of International Settlements, aka the central banks' bank, here it is. In a report released yesterday, the BIS complained surprisingly loudly that in glaring disregard for the ever stricter demands of the Basel III rules (which incidentally will never be met), a very broke Europe continues to ignore every regulatory demand. To wit: "The EU’s plans for tightening bank capital rules fail to live up to the Basel III banking reform, an inspection team of global regulators has decided. The draft EU directive is “noncompliant” with the global deal in two important areas. Its definitions of top-quality capital are looser in at least seven ways and a loophole allows many big banks to assume that their sovereign debt holdings are risk-free."
In the ten years to 2010, the severely obese (Americans who are 100lbs or more overweight) increased about 70%. A new study from RAND Corporation (via ScienceDaily) found that "the proportion of people at the high end of the weight scale continues to increase faster than any other group of obese people, despite increased public attention on the risks of obesity." On the bright side, as we noted here, the faster we get fatter, the sooner we die, and the lower the deficit (via entitlements) will be. Perhaps the way out of this fiscal mess is indeed to eat ourselves to an early death?
September 30 was the last day of Fiscal 2012 for the US which explains why despite the barrage of debt issuance in the past month, the year closed with total debt of just $16.066 trillion, a modest increase of just $50 billion in the month. Luckily, moments ago we got the first DTS of the new fiscal year, which eliminated any residual confusion we had. As of the first day of FY 2013, total US debt soared by $93 billion overnight, and is now a record $16,159,487,013,300.35. One can see why Tim Geithner wants to push all the debt under the coach for as long as possible (and the scariest thing is that the actual increase in Treasury cash was a mere $11 billion). But wait, there's more. As a reminder, final Q2 US GDP was recently revised lower by $20 billion, which if we extrapolate into Q3 (leading to a nominal GDP print of $15.71 trillion), means that as of today, total US Federal debt to GDP is 103%. And rising about 1.5% per month.
Presented with little comment - except to ask, on what basis should we 'believe' that this time is not like the others as Global PMIs plunge...
Volumes picked up for most of the day as US equity markets jerked lower - back to pre-QEternity levels - and AAPL slide ever so gently all day to touch its 50DMA. With about an hour to go, it was clear something had to be done and AAPL levitated on small-lots (as opposed to the bigger lots on the selling) as it pushed back up to VWAP automagically - and dragged the S&P futures back above its VWAP and into the green. Highest AAPL volume in almost a month but trade-size was average as S&P futures levitated 8 points in a straight line and VIX was banged back from 16.5% to 15.7% (down 0.6vols on the day). Stocks were in a world of their own in this liftathon - as Treasuries wiggled along at the low yields of the day and the USD rose all afternoon (from Europe's close). Oil tumbled under $92 and commodities in general slid slightly lower (though intraday vol was high). Staples and HealthCare remain the only post-QEternity sectors in the green. Finally, today's S&P futures action looked more like a EKG than equity trading and with volume leaking badly, things feel a little W&R-like.
U.S. Rep. John Boehner, speaker of the House of Representatives, received nearly twice as much financial support from donors tied to the energy sector than did the next-closest recipient, a report from the National Wildlife Federation finds. The 20-page report highlights the role it says oil companies play in U.S. politics, stating energy companies are working behind the scenes on Capitol Hill to influence legislation in favour of oil, natural gas and coal policies. The NWF's report, however, is non-partisan in its effort to showcase the energy sector's monetary influence over U.S. politics. Sen. Joe Manchin, D-W.Va., who serves on the Senate Energy and Natural Resources Committee, ranked No. 2 on the NWF's list. Of the top 10 lawmakers listed in the NWF report, however, Manchin is the only Democrat and received $480,050 compared to Boehner's $814,060.
It seems the underground economy in Spain is picking up. Hand-crafted T-Shirts have become all the rage as the youth of the country send a subtle message to their leaders... The good news - the shirts are still priced in EURs, likely signifying ongoing confidence in the failed monetary experiment. Although we are confident pricing in New Pesetas is available upon request.