Credit Suisse

One Of The Biggest High Frequenecy Traders Warns Of Potential Market "Catastrophe"

The head of one of the biggest high-frequency trading companies has warned that there are several faultlines in the structure of increasingly electronic, automated financial markets that could lead to a “catastrophe” in the long run. "We’re creeping in the right direction, but unless we proactively address these issues, sometime in the next several decades we are going to experience a catastrophe due to runaway computerised trading,” Tower Research's Mark Gorton said.

Frontrunning: February 4

  • EU Slashes 2016 Inflation Forecast to 0.5% as Growth Seen Slower (BBG)
  • Bank of England cuts UK growth forecasts (FT)
  • Investors Cast Wary Eye on Fed Rate Increases (WSJ)
  • U.N. halts Syria talks as government closes in on Aleppo (Reuters)
  • Credit Suisse Drops as Investment Bank Slump Deepens Losses (BBG)
  • Six OPEC states ready for emergency meeting with non-OPEC members — Venezuela's minister (TASS)

Futures Flat As Dollar Weakness Persists, Crude Rally Fizzles

After yesterday's torrid, chaotic moves in the market, where an initial drop in stocks was quickly pared and led to a surge into the close after a weaker dollar on the heels of even more disappointing US data and Bill Dudley's "serious consequences" speech sent oil soaring and put the "Fed Relent" scenario squarely back on the table, overnight we have seen more global equity strength on the back of a weaker dollar, even if said weakness hurt Kuroda's post-NIRP world and the Nikkei erased virtually all losses since last Friday's surprising negative rate announcement. Oil and metals also rose piggybacking on the continued dollar weakness as the word's most crowded trade was suddenly shaken out.

Frontrunning: February 1

  • Stocks cautious after rocky China data, bonds fly high (Reuters)
  • Oil falls on China data, fading prospect of OPEC action (Reuters)
  • Republican Vote in Iowa Caucus Hinges on Newcomer Turnout (WSJ)
  • When Trump tells supporters not to donate, they mostly listen (Reuters)
  • Goldman Sachs Employees Shift to Rubio as Bush Support Fades (BBG)
  • Four Theories on How Oil Has Hypnotized the Global Stock Market (BBG)

Rally Hobbled As Ugly China Reality Replaces Japan NIRP Euphoria; Oil Rebound Fizzles

It didn't take much to fizzle Friday's Japan NIRP-driven euphoria, when first ugly Chinese manufacturing (and service) PMI data reminded the world just what the bull in the China shop is leading to a 1.8% Shanghai drop on the first day of February. Then it was about oil once more when Goldman itself said not to expect any crude production cuts in the near future. Finally throw in some very cautious words by the sellside what Japan's act of NIRP desperation means, and it becomes clear why stocks on both sides of the pond are down, why crude is not far behind, and why gold continues to rise.

Here's Which Stocks Sovereign Wealth Funds Will Be Selling In 2016

"Within equities which sectors are most vulnerable? We aggregate publically available holdings data to see how overweight these SWFs funds are positioned in terms of sectors and regions relative to the composition of the MSCI AC World index. With the caveat that these publicly available data represent only a portion of their public equity holdings, we find that SWFs are most overweight Financials and Consumer Discretionary, and most underweight Healthcare, Consumer Staples and Technology."

What Buyback Slowdown: "Our Buyback Desk Is Very Busy" Admits Credit Suisse

"Do not worry," investors are told day after day, this is just a swoon because companies are blacked out from buying back their own shares and supporting the irrational valuations in stock markets. Well, Credit Suisse just smashed another leg on the 2-legged stool of equity market perma-bullishness as they explain in their daily note that "talk of seasonal oscillation in buyback activity is over-exaggerated."

The Market Stubbornly Refuses To Believe A Crash May Be Coming: Here's Why

The fabric of the market is showing signs of fracturing, as 9 years of declining policy rates and 6 years of QEs failed to kick-off growth, while, as Fasanara Capital's Francesco Filia notes, further easing has a visibly decreasing marginal effectiveness. It is end-of-cycle-type policymaking and market responsiveness and while some markets and sentiment reflect the concerns of a tail-risk-like collapse, stocks remain dissonant in the medium-term to the ongoing rioting against monetary activism and market manipulation by global Central Banks.

JPM Explains How Crude Carnage Creates $75 Billion SWF "Contagion" For Equities

"Assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016."

Visualizing Brazil's Economic Decline In One "Straight-Line" Chart

From EM darling to depression, it's been a rough ride for the "B" in BRICS. As we kick off 2016, analysts are growing increasingly concerned that Brazil's economic downturn could well be deeper and longer than anyone expected. The market's collapsing expectations are summarized in one stunning chart.

Chinese State Firms' Debt Hits New All Time High, As Profits Tumble

As SOE profits continue to deteriorate at the expense of maximizing jobs and employment (recall the biggest threat facing China is a working class insurrection, or simply said, "lower and middle-class revolution") debt at these same SOEs just hit a new record high: according to the same FinMin numbers, total SOE debt rose by CNY393 billion to CNY78.3 trillion, or over $12 trillion - well above 100% of total Chinese GDP.