Another day, another case of central banks, not one but two this time, dictating "price" action.
Stability is a myth yet it’s what we humans strive for...
They may be able to engineer a stock market rally to further enrich themselves, but they can not propel the real economy of 318 million people. Our consumer society is dying – asphyxiated by debt – shorter of breath and one day closer to death. I’d love to offer some sage advice on how to fix this problem, but it’s too late. Too many people missed the starting gun.
Four years ago, bankers, politicians, and traders were patting themselves on the back after Petroleo Brasiliero (Petrobras) raised a stunning $70 billion in the world's largest share sale, as Bloomberg reported at the time, investors bet on its plans to double output within a decade by tapping offshore fields. Things haven't worked out so well...
JPMorgan Cazenove's global equity strategy group has decided enough is enough - the underperformance of the Eurozone is getting stretched (they note), and are upgrading Euro equity allocations to Overweight at the expense of an Underweight in US stocks. Here are the fives reasons why they made the shift...
Moments ago, Bloomberg released a stunning update that Europe's largest bank is exiting the single-name, both IG and HY, CDS product line, which for years was one of its biggest revenue generators and a product in which DB was for a long time one of the best and deepest CDS trade axes. As Bloomberg reports, Deutsche Bank AG will stop trading investment-grade and high-yield credit default swaps on single credits and will instead focus on trading corporate bonds, according to a spokeswoman.
As Europe gets hungrier and hungrier for a feel-good story, as Brussels longs more and more for a poster child for its 'crisis management' efforts of 2008-2013, as Dublin politicians get closer and closer to facing the crisis-hit electorate, the sunshine being lavished by politicians and the media onto Ireland's economy is likely to get only brighter. It might not feel much warmer, though, on the ground. Nor will it stave off the onset of winter.
The relentless regurgitation of the only two rumors that have moved markets this week, namely the Japanese sales tax delay and the "surprise" cabinet snap elections, was once again all over the newswires last night in yet another iteration, and as a result the headline scanning algos took the Nikkei another 1.1% higher to nearly 17,400 which means at this rate the Nikkei will surpass the Dow Jones by the end of the week helped by further reports that Japan will reveal more stimulus measures on November 19, although with US equity futures rising another 7 points overnight and now just shy of 2050 which happens to be Goldman's revised year-end target, the US will hardly complain. And speaking of stimulus, the reason European equities are drifting higher following the latest ECB professional forecast release which saw the panel slash their GDP and inflation forecasts for the entire period from 2014 to 2016. In other words bad news most certainly continues to be good news for stocks, which in the US are about to hit another record high (with the bulk of the upside action once again concentrated between 11:00 and 11:30am).
Putting Things In Context ...
Though, if history is anything to go by, it offers a potential for outsized returns
"Solutions to the world's problems are not produced in a meeting between Bill Gates and George Soros... Renewal has to come from below... Limiting the influence [of the richest] is of the utmost importance... so that today's upper-class, high-finance capitalism can once again revert to being a capitalism of the real economy and the societal center."
Central banks are printing rules almost as fast as they’re printing money. The consequences of these fast-multiplying directives — complicated, long-winded, and sometimes self-contradictory — is one topic at hand. Manipulated interest rates is a second. Distortion and mispricing of stocks, bonds, and currencies is a third. Skipping to the conclusion of this essay, Jim Grant is worried: "The more they tried, the less they succeeded. The less they succeeded, the more they tried. There is no 'exit.'"
ECB Stress Test Fails To Inspire Confidence Again As Euro Stocks Slide After Early Rally; Monte Paschi CrashesSubmitted by Tyler Durden on 10/27/2014 07:09 -0400
It started off so well: the day after the ECB said that despite a gargantuan €879 billion in bad loans, of which €136 billion were previously undisclosed, only 25 European banks had failed its stress test and had to raised capital, 17 of which had already remedied their capital deficiency confirming that absolutely nothing would change, Europe started off with a bang as stocks across the Atlantic jumped, which in turn pushed US equity futures to fresh multi-week highs putting the early October market drubbing well into the rear view mirror. Then things turned sour. Whether as a result of the re-election of incumbent Brazilian president Dilma Russeff, which is expected to lead to a greater than 10% plunge in the Bovespa when it opens later, or the latest disappointment out of Germany, when the October IFO confidence declined again from 104.5 to 103.2, or because "failing" Italian bank Monte Paschi was not only repeatedly halted after crashing 20% but which saw yet another "transitory" short-selling ban by the Italian regulator, and the mood in Europe suddenly turned quite sour, which in turn dragged both the EURUSD and the USDJPY lower, and with it US equity futures which at last check were red.
If the last three days all started with a rout in futures before the US market open only to ramp higher all day, today it may well be the opposite, when shortly after Europe opened it was the ECB's turn to talk stocks higher, when literally within minutes of the European market's open, ECB's Coeure said that:
- COEURE SAYS ECB WILL START WITHIN DAYS TO BUY ASSETS
Which was today's code word for all is clear, and within minutes US futures, which until that moment had languished unchanged, soared by 25 points. So will today be more of the same and whatever early action was directed by the central bankers will be faded into a weekend in which only more bad news can come out of Ebola-land?