Moments ago The Hill reported that what many thought was absolutely impossible, may in fact become a reality: President Obama is considering issuing an executive order (#394,039,993,837?) to raise the minimum wage for Federal Workers... and in the process - with the help of that other central planner par excellence Bern-ellen - lap all those other Banana republics that everyone so enjoys making fun of.
It was all looking so good. NASDAQ was green for the year (so were Trannies), stocks in general were rising and everyone on TV could proclaim how well the 'market' was handling the taper. Then Dennis Lockhart spoke...
*LOCKHART SEES `GROWING CONFIDENCE' IN 2014 OUTLOOK, U.S. ECONOMY ON `MORE SOLID' FOOTING
*LOCKHART BACKS $10 BLN TAPER AS CONFIDENCE IN 2014 GROWS
That's great news right? Wrong? Stocks didn't like it... and NASDAQ rapidly gave up its gains... Fun-durr-mentals remain in control eh? It shouldn't be a big surprise given what Goldman Sachs warned about over the weekend!
With no major macro news on today's docket, it is a day of continuing reflection of Friday's abysmal jobs report, which for now has hammered the USDJPY carry first and foremost, a pair which is now down 170 pips from the 105 level seen on Friday, which in turn is putting pressure on global equities. As DB summarizes, everyone "knows" that Friday's US December employment report had a sizeable weather impact but no-one can quite grasp how much or why it didn't show up in other reports. Given that parts of the US were colder than Mars last week one would have to think a few people might have struggled to get to work this month too. So we could be in for another difficult to decipher report at the start of February. Will the Fed look through the distortions? It’s fair to say that equities just about saw the report as good news (S&P 500 +0.23%) probably due to it increasing the possibility in a pause in tapering at the end of the month. However if the equity market was content the bond market was ecstatic with 10 year USTs rallying 11bps. The price action suggests the market was looking for a pretty strong print.
If you are anxiously awaiting the arrival of the "economic collapse", just open up your eyes and look at what is happening in Europe. The entire continent is a giant economic mess right now. Unemployment and poverty levels are setting record highs, car sales are setting record lows, and there is an ocean of bad loans and red ink everywhere you look. Over the past several years, most of the attention has been on the economic struggles of Greece, Spain and Portugal and without a doubt things continue to get even worse in those nations. But in 2014 and 2015, Italy and France will start to take center stage. France has the 5th largest economy on the planet, and Italy has the 9th largest economy on the planet, and at this point both of those economies are rapidly falling to pieces. Expect both France and Italy to make major headlines throughout the rest of 2014. The following are just a few of the statistics that show that an "economic collapse" is happening in Europe right now...
Recently, the FBI made a significant change to its self-proclaimed primary focus in its fact sheet from “law enforcement” to “national security.” This change merely confirms what I and countless others have claimed to be true for quite some time. That the entire regulatory, security and intelligence apparatus of these United States has been redirected away from protecting the Constitution and the rule of law, toward a narrow focus on protecting the economic and social positions of the oligarch class at all costs under the guise of a “war on terror.”
Despite the best day in the S&P (+0.6%) since the Taper (12/18), this remains the worst start to a year since 2005. The Dow stands out as the best of the bad bunch ( down only 0.25% from 2013 close highs) while Trannies remain the worst. Homebuilders tumbled back to recouple with Financials post-Taper. Treasuries decided to ignore the equity strength and rallied once again (with 10Y now -10bps on the year) even as the USD was well bid back to unch on the week (once again all the vol in the US open to EU close period) with notable CAD weakness to its lowest since May 2010. USDJPY was on-and-off in charge with stocks staying in sync until the EU close, reconnecting briefly in the afternoon, then taking off again. VIX dropped back under 13% (but stocks were relatively outperforming). Precious metals remained in the headlines, this time with weakness, but from the early spike down, they recovered half the losses.
Heading into the North American open, stocks in Europe are seen broadly higher, with peripheral EU stock indices outperforming after Ireland successfully returned to capital markets with its 10y syndication that attracted over EUR 10bln. Financials benefited the most from the consequent credit and bond yield spreads tightening, with smaller Italian and Spanish banks gaining around 4%. Following the successful placement, IR/GE 10y bond yield spread was seen at its tightest level since April 2010, while PO/GE 10y spread also tightened in reaction to premarket reports by Diario Economico citing sources that Portuguese govt and debt agency IGCP consider that the current level of yields already allows Portugal to go ahead with a bond sale. Looking elsewhere, the release of better than expected macroeconomic data from Germany, together with an in line Eurozone CPI, supported EUR which gradually moved into positive territory. In addition to that, smaller MRO allotment by the ECB resulted in bear steepening of the Euribor curve and also buoyed EONIA 1y1y rates. The Spanish and Italian markets are the best-performing larger bourses, Swedish the worst. The euro is stronger against the dollar. Japanese 10yr bond yields fall; Spanish yields decline. Commodities gain, with wheat, silver underperforming and Brent crude outperforming. U.S. trade balance data released later.
Workers at a tire plant in Northern France have taken two managers hostage until Goodyear (the firm that owns the plant and has been trying to shutter it for years) meets the mabor unions demands. WSJ reports, as Goodyear winds down operations with the plant almost idle, French labor law requires the company to keep all workers employed, which means many of them don't work more than a couple of hours a day while still getting full salary. The situation is why Titan International's Maurice Taylor blasted that he "would be stupid" to operate the plant on that basis.
"For Apple Computers to pay their workers $2 an hour while they have $150 billion in the bank is nothing short of obscene. They have workers who are doing back-breaking and eye-burning work in depressed states of mind and in many instances have already committed suicide. Instead of treating their employees like human beings, they are treated like animals. If it were not for their employees, Apple would not be where it is today. But instead of giving these people a better life, they give these people the bare minimum and defend this action with the argument that the wage is higher than the average there and in-line with what their competitors are paying."
The "polar vortex" (no, really) which is about to unleash even record-er cold temperatures upon the US may be the greatest thing to happen to the economy: after all once Q1 GDP estimates miss once again, what better scapegoat to blame it on than cold winter weather during... the winter. However, for the overnight markets, the weather seems to have had an less than desired effect following both much weaker Services PMI data out of China, and after the entire USDJPY ramp achieved during Bernanke's late Friday speech evaporated in the span of two hours in Japanese Monday morning trading, sending the Nikkei reeling lower by 2.35%. One reason for this may be that like in the early summer when both the Yen and the Nikkei froze in a rangebound formation, South Korea has vocally started t0 complain about the weak Yen, which as readers may recall was one of the catalysts to put an end to the surge in the USDJPY and EURJPY. This time may not be different, furthermore as Goldman forecast overnight, it now expects a BOK rate cut of 25 bps as soon as this Thursday. Should that happen expect the JPY coiled-short spring to pounce.
Contrary to ongoing attempts by the administration to refocus the public's attention on such focal points as guns, an imminent external cybersecurity threat (until it was revealed that the biggest cyber terrorist is the NSA itself), and climate change, the three still remain, pardon the pan, at the cold end of the spectrum when it comes to what issues most concern the US public. On the other end, for one decade and counting, the "top priority" for the US public was and continues to be "the economy", stupid.
All signs point to serious trouble for the Chinese economy. The best ways to play a China downturn: short-selling Australian banks, China property and the yuan.
2013 already saw violent unrest in some of the most stable countries in the world like Singapore and Sweden, all underpinned by absolute disgust for the status quo. Whether today or tomorrow, this year or next, there will be a reckoning. The system is far too broken to repair, it must be reset. It’s simply absurd to look at the situation objectively and presume this status quo can continue indefinitely... that this time is different… that we’re somehow special and immune to universal principles.
The now ubiquitous prior upward revision helped headlines crow of 'another' decline in initial jobless claims this week. Initial claims beat expectation of 344k with a 339k print, whis is now a drop from a previously reported 338k that is now revised up to 341k... all makes sense, right? It seems claims have stabilized somewhat after the few weeks of glitches and shutdown SNAFUs and the downtrend appears to have stalled as these levels of claims are at the same level as 5 months ago. Bear in mind this is the last print for 2013 (not first print of 2014 data) and with 1,391,297 people on Emergency benefits due to start 'tapering' this week, we can only imagine the 'glitches' that will occur going forward.
The fifth anniversary of Zero Hedge is just around the corner, and so, for the fifth year in a row we continue our tradition of summarizing what you, our readers, found to be the most relevant, exciting, and actionable news of the year, determined objectively by the number of page views. Those eager for a brief stroll down memory lane of prior years can do so at their leisure, by going back in time to our top articles of 2009, 2010, 2011 and 2012. For everyone else, without further ado, these are the articles that readers found to be the most popular posts of the past 365 days...