While today's key events were supposed to be the Jackson speeches first by Janet Yellen at 10:00am Eastern and then by Mario Draghi at 2:30 pm, Ukraine quickly managed to steal the spotlight yet again when moments after the first Russian humanitarian aid convoys entered Ukraine allegedly without permission, Kiev first accused Russia of staging a direct invasion, even if moments later it changed its tune and said it had allowed the convoy in to "avoid provocations." In other words, your daily dose of Ukraine disinformation, which initially managed to push futures down some 0.3% before futs regained virtually all losses on the subsequent clarifications. Expect much more conflicting, confusing and very provocative headlines out of Kiev as the local government and the CIA try to get their story straight.
Amid his corruption indictments, Texas Governor Rick Perry is making more headlines today. During a CNN interview, Perry exclaimed "it's possible ISIS may have crossed into The United States from Mexico." Speaking earlier at The Heritage Foundation, Perry blasted, "they need to be eliminated, and they need to be eliminated now."
With the FOMC Minutes in the books, the only remaining major event for the week is the Jackson Hole conference, where Yellen is now expected to talk back any Hawkish aftertaste left from the Minutes, and which starts today but no speeches are due until tomorrow. And while the Minutes were generally seen as hawkish, stocks continue to levitate, blissfully oblivious what tighter monetary conditions would mean to an asset bubble, which according to many, is now the biggest in history. And speaking of equities, US futures climbed to a fresh record high overnight on just the right mix of bad news.
The last 2 days have seen the USD index rise at its fastest pace in almost 4 months, closing in on 1-year highs. Led by JPY and EUR weakness, the USD is up over 1% this week (which is set for the best week in 9 months). While stocks shrugged off the hawkish minutes initial kneejerk lower and surged towards new record highs, credit markets were not as exuberant about the great suck out of liquidity (and how they'll manage to roll the wall of debt forthcoming). VIX was slammed back to one-month lows (even as the Fed admitted greater uncertainty) slamming stocks higher. Treasury yields rose notably (with the short-end underperforming) as 2Y-5Y up 5-6bps, 10-30Y up 1-3bps. Gold and silver drifted modestly lower and oil jerked higher. Copper was up from earlier on China restocking rumors. Into the close, stocks faded quickly - rather disappointingly ruining mainstream media's "new record high" headlines. Janet, save us....
"At a time when so much may seem uncertain, the people of Ferguson can have confidence that the Justice Department intends to learn - in a fair and thorough manner - exactly what happened... In order to begin the healing process, however, we must first see an end to the acts of violence in the streets of Ferguson."
At 1033ET, Bloomberg headlines flashed: "WHOLE MILK POWDER PRICES FALL 11.5% IN GDT AUCTION" which caused an instant collapse in Kiwi (NZDUSD) as headline-reading algos reacted. However, as "humans" knew and @FXMacro reminded Bloomberg, that was last month's drop... When Bloomberg reissued: "CORRECT: WHOLE MILK POWDER PRICES RISE 3.4% IN GDT AUCTION" Kiwi surged higher. These are your efficient markets...
The Ferguson Morning After: Police "Come Under Heavy Gunfire", Arrest 31 Including Photographer, JournalistSubmitted by Tyler Durden on 08/19/2014 10:20 -0400
The local authorities have tried everything: aggressive police, appeasing highway patrol, curfew, no curfew, and last night, the national guard. Nothing seems to work. Because what until 9 pm was a peaceful protest, it quickly, as documented here extensively, spiraled out of control. And as the crowd advanced, police fired stun grenades and tear gas at protesters. This escalation allegedly happened after, as Reuters reports, the police came under heavy gunfire leading to the arrest of 31 people, including a famous Getty photographer and yet another journalist.
A quick reminder of how geopolitics governs markets: on Friday, the market plunged 0.005% over fears Ukraine and Russia may be about to go at it all out after a fake report Ukraine shelled a Russian military convoy. On Monday, the same "market" soared just under 1% as the news that had caused the "crash" was refuted. That has been the dominant rinse, repeat theme for the past month and will continue to be well after Yellen's Friday speech at Jackson Hole (although one does wonder why she is not speaking on Wednesday when the symposium begins). Not surprisingly, with only modest re-escalation news overnight (that Russia is preparing further retaliatory sanctions against the West), which is simply "pent up de-escalation" in the eyes of Keynesian algos, futures are again up a solid 0.2% and rising, and the way the rampy USDJPY is being manipulated before its pre-market blast off, we may well see the S&P hit 1980, if not a new all time high before 9:30am, let alone during today's cash session. In any event, whatever you do, don't you dare suggest that algos should care one bit about Ferguson and its implications for US society.
While most headlines are focused on the devastating drought in California, which by some measures is the worst on record, there is another 'factor' that has exploded to record highs - the heat. As Bloomberg reports, the California heat this year is like nothing ever seen, with records that go back to 1895 and with 70 percent of the state’s pastures rated “very poor to poor,” according to the USDA, things do not appear to be about to get better any time soon as The International Panel on Climate Change warns this "hot weather" is becoming simply "weather."
The lack of World War 3 this weekend was the perfect catalyst for buying stocks back up towards record highs... because Putin must have folded, right? Oil prices slipped, with WTI briefly back under $96, which lifted Trannies 1.75% on the day (best performer) but the Nasdaq's break of cycle highs (to March 2000 highs) is the big news for bubble-watchers (though it's different this time remember). VIX broke back below 13 to almost a 4-week low close. Treasuries were weak all day especially after Europe closed with the long-end underperforming (30Y +6.5bps) - 3rd worst day of yeasr for 30Y - with yields rising back to Russian convoy "destroyed" headline levels. Gold dropped back under $1300 as silver rallied 0.5%. S&P futures volumes were 40% below average as AAPL flash-crashes but has almost round-tripped to 2012 highs.
Friday's main event, Ukraine's alleged attack of a Russian military convoy, has come and gone, and as we mused on Friday has promptly faded into the memory of all other fabricated headlines released by the country engaged in a major civil war and an even more major disinformation war. To be sure, Germany's DAX has recovered virtually all losses, US futures are up about 9 points, and the 10 Year is back to 2.37%. One wonders what algo-slamming headline amusement Ukraine has in stock for us today, although anyone hoping for a quick "de-escalation" (there's that word again) will have to wait following yesterday's meeting of Russian, Ukraine, German and French ministers in Berlin where Russia's Lavrov said he saw no progress on Ukraine cease-fire, Foreign Minister Sergei Lavrov says in Berlin, adding that a cease-fire should be unconditional.
Futures Continue Levitation On More "Deescalation" Hopes Despite UK Warning Russia Of "Serious Consequences"Submitted by Tyler Durden on 08/15/2014 07:05 -0400
There were headlines for everyone this morning, but especially for fans of what is increasingly known as Russia's "Schrodinger Invasion" of East Ukraine: one which may or may not be happening depending on i) one's point of view and ii) how one is observing it.