Theories abound why this is suddenly happening, after years of deceptive calm.
Think it's game over for Putin? Think again...
- M&A Bubble is bursting: AbbVie Says It Reconsiders Merger Pact With Shire (WSJ)
- Winner of bad headline timing award: Spinoffs Could Set Stage for Next Merger Wave (BBG) - and now wait for the spinoffs getting pulled
- Record mortgage settlement pushes Bank of America into third-quarter loss (Reuters)
- Korea joins the Japan currency war: Bank of Korea Cuts Base Rate (WSJ)
- Double Irish’s Slow Death Leaves Google Executives Calm (BBG)
- Global Oil Glut Sends Prices Plunging (WSJ)
- Slow Rise in Prices Shows China’s Economy Is Still Struggling (WSJ)
For the fourth consecutive night, futures attempted to storm higher, and were halted in their tracks when the USDJPY failed to rebound from the recalibrated 107 tractor beam, following a statement by the BOJ's former chief economist and executive director (until March 2013) who said that now is the time for the Bank of Japan to begin tapering. Needless to say, there could be no worse news to bailout and liquidity-addicted equities as the last thing a global rigged market can sustain now that QE is about to end in two weeks, is the BOJ also reducing its liquidity injections in the fungible world. This promptly took away spring in the ES' overnight bounce. Not helping matters is the continuing selloff in oil, which as we reported first yesterday, has hit the most oversold levels ever, is not helping and we can only imagine the margin calls the likes of Andy Hall and other commodity funds (ahem Bridgewater -3% in September due to "commodities") are suffering. But the nail in the coffin of the latest attempt by algos to bounce back was the news which hit two hours ago that a second Ebola case has been confirmed in Texas, and just as fears that the worst is over, had started to dissipate.
Nearly two decades of central bank financial repression have created huge distortions and imbalances in the world economy. Now they are coming home to roost as the impossibility of ZIRP forever dawns on even our mad money printers. Having created yet another round of ebullient financial bubbles, they are now getting palpably nervous.
The fact that the US economy is nowhere near strong enough to offset the deflation it would import and is already importing through USD strength vs EUR and JPY in particular, has now become a key market theme. Crucially, markets are now collectively having to consider what Bob Janjuah thinks is the reality – that annual trend global growth is converging down at around 2.5%, well short of the pre-crisis levels of over 4%. Janjuah believes "we will see UST 10yr yields closer to 1.5% before they get anywhere near 3.5%, with 10yr Bund yields at 50bp; and a weekly close on the S&P 500 below 1905 was and remains his key pivot point - targeting 1770 as the next stop."
With this in mind we hope the Swiss people display their fierce independence and reject the advice of the "experts," many of whom got us into this mess, in favour of the policies that have kept them peaceful and prosperous for centuries ...
- No Happy Ending for Investors in Central Bank Fairy Tale (BBG)
- Ebola Response Strains Hospitals (WSJ)
- Obama, foreign military chiefs, to thrash out Islamic State plans (Reuters)
- Draghi’s ‘Whatever It Takes’ Plan on Trial at EU Court (BBG)
- Too-Big-to-Fail Banks Face Up to $870 Billion Capital Gap (BBG)
- Iran’s Message to World: You Need Us to Fight Islamists (BBG)
- Facing new oil glut, Saudis avoid 1980s mistakes to halt price slide (Reuters)
- Ukraine Grannies Outprice Banks on Hryvnia Black Market (BBG)
- HK police use sledgehammers, chainsaws to clear protest barriers, open road (Reuters)
- Gazprom Quarterly Net Rises 13%, Misses Estimate on Ukraine Debt (BBG)
“Hyperinflation and hyper-deflation are just two different forms of the same phenomenon: credit collapse. Arguing which of the two forms will dominate is futile: it blurs the focus of inquiry and frustrates efforts to avoid disaster.”
'Everyone' knows that the Japanese economy is weakening (apart from Abe and Kuroda obviously), 'everyone' knows that the European economy is tumbling towards another recession, 'most' know that China is really slowing (no matter what the magic of excel enables GDP to be)... and 'everyone' knows that the US economy is the cleanest dirty shirt, will decouple from the rest of the world, and thanks to endless extrapolated dreams, will lead the world to escape velocity. Except... recent macro data suggests otherwise...
Just as we warned, liquidity was incomprehensibly low today (below normal pre-market levels during the peak of the trading day) and the intraday whipsaws were meteoric as a closed cash bond market enabled the slightest twitch in USDJPY to send S&P algos into conniptions. Biotech crashed. Trannies were ripped ridiculously higher at the open - then collapsed into correction (-11% from highs); US Airlines have fallen for 6 straight days, crashing 17% (with today's 7% plunge - driven by chatter over airborne Ebola - its biggest in over years). Tresury futures implied a notable drop in yields across the curve (10Y -7bps at 2.21%, 30Y 2.97%, and 5Y 1.45%). The USdollar closed -0.33% led by EUR and JPY strength (but AUD surged 1% extending gains after China data). Gold ($1234), Silver, and copper all gained on the day as WTI fell once again (despite some intraday strength in the middle of the day). Stocks "flash-crashed" on very heavy volume in the last 30 mins with VIX breaking above 24 (highest in 16 months). All major equity indices are now below their 200DMA with the worst 3-day loss since late 2011.
According to Bloomberg, China’s vehicle sales grew at the slowest pace in 19 months in September as demand for trucks and buses slumped with the weaker economy. Total vehicle sales, which include passenger and commercial vehicles, rose 2.5 percent from a year earlier to 1.98 million units, the China Association of Automobile Manufacturers said today. That was the slowest pace since February 2013.
While some are focused on the demise of the dollar, the fact is that it has been appreciating and this is causing some confusion. See if this helps clarify what is happening.
Regulators from the U.S. and the UK are in a “war room” today conducting financial war games to see if they can cope with fall-out when the next big bank collapses. "We are going to make sure that we can handle an institution that previously would have been regarded as too big to fail. We're confident that we now have choices that did not exist in the past," Osborne said at the International Monetary Fund's annual meeting.
During every major breakdown in the last five years, the Fed announced a new monetary program. This time around, the Fed is committed to ending QE... So who will save stocks now?