Eurozone

• Fed speakers are likely to take focus in the US this week as market participants attempt to forecast the likelihood of a December FOMC rate lift off
• Eurozone GDP release is the most notable Eurozone data of the week, with a possible downbeat reading increasing the possibility of further easing by the ECB

• Global Stocks Slip Lower (WSJ)
• Dollar sits pretty, bond yields rise as Fed bets firm (Reuters)
• Takeover Loans Have Few Takers on Wall Street (WSJ)
• Chinese Buyers Seek Dollar Assets as Promise of Yuan Gains Fades (BBG)
• Banking Giants Learn Cost of Preventing Another Lehman Moment (BBG)
• Eurozone Finance Ministers Won’t Release $2.15 billion Loan to Greece (WSJ)

Once again, the two major macroeconomic announcements over the weekend came from China, where we first saw an unexpected, if still to be confirmed, increase in FX reserves, and then Chinese trade data once again disappointed tumbling by 6.9% while imports plunged 18.8%. So how did the market react? The Shanghai Composite Index rose for a fourth day and reached its highest since August 20because more bad data means more easing from the PBOC, and just to give what few investors are left the green light to come back into the pool, overnight Chinese brokers soared after Chinese IPOs returned after a 5 month hiatus. Elsewhere, Stocks and currencies in emerging markets slump on prospect of higher U.S. borrowing costs before year-end and after data underscored slowdown in Asia’s biggest economy. Euro strengthens.

In case you have been hibernating, the European Union (EU) is already in a complete state of disarray. Everywhere you look - economy, politics, security, society, demographics - there are very serious problems with no credible solution in sight. This does not bode well for the future of the EU, starting with those who will be living in it.  The EU doesn't need any nationalists to destroy its future prospects. It’s doing absolutely fine on its own.

"The truth is, the debt ceiling doesn’t actually limit government spending. It’s a farce. Every time government debt gets close to the debt ceiling, Congress just raises it.”

This is the fifth time in the past three years that the VIX rose 2% of more on a day the S&P 500 also rose, and short-term volatility expectations were at least 10% below longer-term volatility expectations. Those dates were: September 14, 2012, January 21, 2014, August 25, 2014, and May 18, 2015. Over the next month, the S&P 500 was not able to gain more than +1% at its best point, and suffered a loss averaging -3.2% at its worst point. Quite a negative reward-to-risk ratio.

For those eager to cut to the chase and curious if overnight we have had another standard USDJPY ramp levitating US equity futures on low volume, the answer is yes. And since the USDJPY carry was patient enough, it managed to trigger the 2100 ES stops and as of this moment the futures were comfortably on the politically-correct side of 2100.

The current stock market melt-up hardly qualifies as limp. Even the robo-machines and hyper-ventilating day traders apparently recognize that their job is to tag the May 2015 highs and then get out of the way. So when and as they complete their pointless mission, the question recurs as to why the posse of fools in the Eccles Building can’t see that they are inflating one hellacious financial bubble; and that when it blows it will deconstruct their entire 7-year project of make-pretend recovery.

The most entertaining overnight story has to do with the latest farcical development in the Chinese "market" when just after open, it was reported that PBOC Governor Zhou said a trading link with Shenzhen will start this year which promptly sent all Chinese brokerages soaring, and the Shanghai Composite jumped over 3%. And then, out of the blue, the PBOC said the undated comments were actually as of May. As Bloomberg put it, "China’s central bank unintentionally sparked a surge in the nation’s stock market by publishing five-month-old comments from governor Zhou Xiaochuan that said a link between exchanges in Shenzhen and Hong Kong would start in 2015."

While there are certainly reasons to be "hopeful" that stocks will continue to rise into the future, "hope" has rarely been a fruitful investment strategy longer term. Therefore, let's analyze each of the optimist's arguments from both perspectives to eliminate "confirmation bias." 

Amid the ever-expanding easing program in Europe (longer? more-er? different-er?), one of the gravest concerns was (amid a growing scarcity of collateral), finding willing sellers (at any price) to meet the needs of central bank asset purchasers could be a problem. However, as The FT reports, it appears the Chinese stepped up to the plate to 'help' The ECB (rather The Bundesbank) out from its dilemma. Just as we saw with Chinese selling US Treasuries (whether to diversify away from the major reserve currencies, deal with outflows, or to manage a liquidity crisis at home), The PBoC's reserve management wing, the State Administration of Foreign Exchange, has been selling some of its German government bonds since the ECB began buying them in March, say two sources close to central banks in China and Europe. This news has prompted further weakness in Bunds today, despite expectations of Draghi unleashing more buying in December.

"The rise in household savings rates amid so much central bank support is paradoxical to us, and mimics what we highlighted in the credit market earlier this year. Companies in Europe are deleveraging, not releveraging"

Europe has unleashed yet another monetary panic, and nowhere is it more visible than in what happened today across the short end of Europe's government curve.  As the table below shows, more than half of European sovereign issuers just saw the yield on their 2 Year Notes trade not only below zero, but hit never before seen negative yields!

It will become clearer, fast, what an awful mess Brussels and Berlin have created here, because with winter approaching more refugees will fall victim to the conditions under which they’re forced to live once they’ve entered Europe. Which, in their own eyes, will still be preferable to the conditions in their homelands. And then what will we do, when dozens start dying from cold and diseases? Send in more police and military? This is a road to a very bleak nowhere.

Germany's Suddeutsche Zeitung reports that just two (or is it three, this past summer is one big blur) months after Greece voted through its third bailout, one which will raise its debt/GDP to over 200% on a fleeting promise that someone, somewhere just may grant Greece a debt extension (which will do absolutely nothing about the nominal amount of debt), its creditors have already grown tired with the game and are refusing to pay the next Greek loan tranche of €2 billion.