headlines

Going into the US open, most major European bourses are trading in modest positive territory this follows the publication of a Goldman Sachs research note titled “The Long Good Buy” in which the bank outlines its thoughts that equities will embark on an upward trend over the next few years, recommending dropping fixed-income securities. We have also seen the publication of the Bank of England’s minutes from March’s rate-setting meeting in which board members voted unanimously to keep the base rate unchanged at 0.50%; however there was some indecision concerning the total QE, with members Miles and Posen voting for a further increase to GBP 350bln, however the other seven members voted against the increase. Following the release, GBP/USD spiked lower 35 pips but has regained in recent trade and is now in positive territory.  Looking elsewhere in the session, UK Chancellor Osborne will present his budget for this financial year at 1230GMT. We will also be looking out for US existing home sales and the weekly DOE inventories.

There are those who, not illogically, thought that the second interest rates start creeping up, that there would be a rush of mortgage activity to lock in rates as low as possible before 30 year mortgages roll ever higher. Of course, for that plan to work, one Benjamin Shalom Bernanke would need to have broad credibility among the general population, as he would need to be perceived as one who would not rush to purchase bonds in the future, should rates jump far too high, in the process impairing banks and PDs which still hold massive amounts of paper. If, however, that plan were to not work, then the latest recent attempt to force a rotation out of stocks and into bonds would have abysmal consequences on housing, as the entire mortgage issuance machinery would grind to a halt. Alas, it appears the latter has happened. Minutes ago we got the latest MBA Mortgage Application data and it was ugly. The broad Mortgage Application index collapsed by 7.4% in the week ending March 16, when rates experienced the bulk of the move downward, which was the 6th consecutive week of declines, following last week's 2.4% drop. And while refis have been down for 5 weeks in a row, with the index slamming 9.3% lower as higher rates have now obviously killed any interest in mortgages, so have purchase applications. MBA Purchasing index was down 4.4%, breaking a trend of 3 weeks of gains. Some other hard statistics: the Average 30 year fixed rate soared to 4.19% from 4.06% last week, while the refi % of number of loans dropped to 73.4% - the lowest since July 2011.

Moments ago we saw headlines flashing of a major 7.6 magnitude earthquake swaying Mexico City. It turns out the earthquake was even stronger, and according to the USGS is now classified as 7.9. From Reuters: "MEXICO CITY, March 20 (Reuters) - A major 7.9 magnitude earthquake struck near Acapulco on Mexico's Pacific coast, the U.S. Geological Survey said on Tuesday. Earlier it had been reported at 7.6 magnitude." Luckily, as Al Jazeera's Alan Fisher notes, "Mexican TV reports no major damage in the State of Oaxaca" citing the local governor.

Some curious headlines just out from the ICE via BBG:

• ICE TO LIMIT BRENT, WTI PRICE MOVEMENT $1.25/BBL FOR 5 SECONDS
• ICE TO SET INTERVAL PRICE LIMITS ON CRUDE, GASOIL FROM APRIL 1
• ICE TO LIMIT GASOIL PRICE MOVEMENT $10 A TON FOR 5 SECONDS

Either SkyNet is about to take over the last bastion - the commodities market, or the ICE knows something we dont... Or this is just a completely coincidence.

Headlines only via Bloomberg for now, with some very modest downside in the stock for now:

• *CONSUMER REPORTS STUDYING WHETHER APPLE IPAD POSES INJURY RISK
• *CONSUMER REPORTS SAYS IT'S TESTING IPAD AMID REPORTS OF HEATING
• *APPLE'S IPAD SUBJECT OF THERMAL ANALYSIS BY CONSUMER REPORTS

Perhaps this is Apple's way of allowing us to eat iPads warm? A new feature not a bug? Or perhaps it is really smart as we see gas prices rise as a way to heat our homes more efficiently (although in the new normal cold weather is a thing of the past so it may have been unnecessary)?

Heading into the North American open, EU stocks are seen lower across the board as market participants reacted to cautious comments from Moody’s rating agency on Spain, which noted that Spain’s fiscal outlook remains challenging despite easier targets. Still, the ratings agency further commented that easier targets do not affect Spain’s A3 government bond rating with a negative outlook. Separately to this, a BHP Billiton executive said that Chinese demand for iron ore is flattening, while according to China's state-backed auto association, China's vehicles sales this year will probably miss their growth forecasts. As a result, basic materials sector has been the worst performing sector today, while auto related stocks such as Daimler and VW also posted significant losses. The ONS reported that inflation in the UK fell to 3.4% in February, down from 3.6% in January. However, higher alcohol prices stopped the rate declining further. Going forward, the latter half of the session sees the release of the latest US housing data, as well as the weekly API report.

"Whocouldanode?" that Apple would do something like pay a de minimus dividend and begin a modest buyback program? Indeed, initial reactions for the stock seemed to be 'sell the news' but of course, it wouldn't be a day ending in 'y' if Apple didn't close green and sure enough, with seconds to spare, Apple managed to close over $600 for the first time. BofA, not so much. After pinging $10 (a healthy double of recent lows), chatter of a secondary began the process of 'normalizing' its recent behavior (the stock is still up 17% post JPM-divi/Stress test news, a whopping 10% better than any of its peers in that 4 day period). The leak in financials dragged on the S&P which limped back lower to close almost perfectly at its VWAP as NYSE trading volumes (after almost record-breaking high levels on Friday OPEX hedge removal day) dropped back to near their lows . Credit outperformed equities today but its a very 'technical' day for credit in general with the CDS/index rolls tomorrow (meaning the major credit indices will move to new maturities and new components) though HYG staggered notably early in the day. USD and Treasury weakness were the headlines of the day (aside from AAPL of course - which apparently has a great new screen) which of course helped commodities rally with high-beta Silver the best on the day +1.2% from Friday and WTI breaking $108 as Gold limped higher (tortoise-like) over $1660 at the end. VIX rose once again and the term structure flattened a little but once again post-OPEX and futures roll, there are some more difficult apples-to-camels comparisons there. Finally we note average trade size in ES today was its largest since 7/1/11.

Ahead of the US open, markets are exhibiting some modest risk appetite, with all major European bourses trading higher, and financials outperforming all other sectors. There has been little in the way of key data from Europe, however we have seen the Eurozone Trade Balance coming in alongside expectations in the seasonally adjusted reading. Bund futures continue to move lower in recent trade as US participants come into the market, with the 10-year German yield crossing the 2% level to the upside, trading at a level not seen since the 10th February. Bunds may also have experienced some pressure following the release of a research note from a major US bank recommending rotation trade with the selling of bonds and the buying of equities. USD/JPY is seen trading higher ahead of the US open following the overnight release of some relatively dovish BoJ minutes, with commentary suggesting further easing in Japan in the future. Taking a look at the energy complex, The IEA have commented on yesterday’s speculation concerning the use of the US’ Special Petroleum Reserve, stating that they have not received any contact regarding any emergency oil release. As such, WTI and Brent crude futures are seen higher; however they have seen some selling off in recent trade.

In one of the strangest headlines from Bloomberg today, MuppetGate takes on a new life...

*MAYOR BLOOMBERG MEETS WITH GOLDMAN EMPLOYEES AFTER SMITH OP-ED

Caption Contest seems appropriate...

Update: as we hit print, we see headlines that the UK will cooperate with the US on bilateral agreement to release oil stocks. Crude down big on the news, which is merely an advance move ahead of almost inevitable war with Iran, simply to make the spike more palatable.

The push to get Iran to do something terminally irrational (now that USS Enterprise in its final tour of duty is almost on location just off the side of CVN-70 Lincoln and CVN-72 Vinson in the Arabian Sea, where the US will shortly have not one, not two, but three aircraft carriers) is now in its final stretch. As AP reported earlier, Iran has been now entirely cut off from the global financial system, as that anchor of international financial transactions, SWIFT, has just taken Iran off the grid. This leaves Iran with just three options for international trade: making gold into a fully convertible currency, barter, or exchanging Rials for Renminbi and other local currencies. As a reminder, virtually the entire non-parked naval fleet will be in the Arabian Sea and Persian Gulf in the next 4-6 days, where 3 aircraft carriers and one big-deck amphibious warfare ship are just waiting for the order.

Gregg Smith quit Goldman in the grand style on New York Times blasting GS culture of greed.  Goldman's own track record supports Smith's statement.

UPDATE: The UK outlook change has had little reaction so far: TSY yield down 1-2bps, gold/silver bounced up a little, and a small drop in GBP.

While most of the talk will be about the drop in precious metals today, the sell-off in Treasuries is of a much larger relative magnitude and yet equities broadly ignored this re-risking 'signal'. At almost 2.5 standard deviations, today's 10Y rate jump (closing it above the 200DMA for the first time in eight months) trumps the 1.3 standard deviation drop in Gold prices - taking prices back to mid-January levels. According to our data (h/t JL) for only the 14th time in the last five years (and not seen for 16 months) Treasury yields rose significantly and stocks fell as the broad gains in yesterday's financials (on the JPM rip) were held on to at the ETF level but not for Morgan Stanley, Goldman Sachs, or Citigroup (who gave all the knee-jerk reaction back). Tech led the way as AAPL surged once again (though faltered a few times intraday) having now completed back-to-back unfilled gap-up-openings. Credit and equity were generally in sync until mid afternoon when the up-in-quality rotation took over and stocks and high-yield sold off (notably HYG - the high-yield bond ETF underperformed all day long) while investment grade credit rallied to multi-month tights. VIX bounced higher (notably more than the S&P would have implied) recovering to Monday's closing levels and back above 15%. The Treasury sell-off was 'balanced' in terms of risk-on/-off by the strength in the USD (and modest weakness in FX carry pairs as JPY's weakness was largely in sync with the rest of the majors - hinting its was a USD story). Oil and Copper both lost ground (as did Silver - the most on the day) though they tracked more in line with USD strength than the PMs.

Going into the US open, European equity markets have carried across some risk appetite from last night’s Wall Street news that 15 out of 19 major US banks had passed the Fed’s stress test scenarios. This risk appetite is evident in Europe today with financials outperforming all other sectors, currently up over 2%. Data released so far today has been relatively uneventful, with Eurozone CPI coming in alongside expectations and Industrial Production just below the expected reading for January. Taking a look at the energy complex, WTI and Brent crude futures are seen on a slight downwards trajectory so far in session following some overnight comments from China, highlighting the imbalance in the Chinese property market, dampening future demand for oil. Looking ahead in the session, the DOE crude oil inventories will shed further light on the current standing of US energy inventories.

Mark Fisher is a staple contributor on CNBC. Or at least was. According to various headlines flashing across both Bloomberg and Reuters, it seems that his MBF Clearing Corp is the first victim of the CFTC expanding its MF Global inquiry, and Fisher's MBF Clearing Corp of performing just the same "vaporization" activity that MF Global engaged in and that boggle regulators' minds.

MBF CLEARING CORP SUED BY CFTC FOR FAILIING TO SEGREGATE FUNDS
CFTC ACCUSES MBF OF DEPOSITING CUSTOMER FUNDS INTO A NON-SEGREGATED ACCOUNT THAT ROUTINELY HELD BETWEEN $30-90 MLN
CFTC ALLEGES CUSTOMER ACCOUNTS WEREN'T PROPERLY SEGREGATED

Oops. In other news, JPM and Jon Corzine are both completely innocent of anything. But at least the CFTC can say it has done its duty of punishing transgressors and all is now well.

While he does have some new philosophy (at X% off MSRP of course, coming to a Kindle near you) to preach, Nassim Taleb's re-emergence from the darkness of the media spotlight starts with a bang: "I realized that something wrong is going on, and only one candidate 'Ron Paul' seems to have grasped the issues and is offering the right remedies". He was given quite a lengthy period to proselytize as he outlines the Big Four problems he sees with the USA (and for that matter the world): Deficits (metastatic governments), The Fed, Militarism, and non-Bailouts (what is fragile should break early). As Ron Paul notes, "It's an illusion that the USD can bailout the world", Taleb makes many interesting, though a little murmur-some for our liking, points like "you don't gamble with hyperinflation" and his comparison between the US and the Soviet Union will surely raise some headlines as he rants of the growing divide between public and private employees standards of living, our "need to do something drastic about it" and on Obama/Government and deficit reduction that "the whole thing is rotten".