If Friday and yesterday it was Europe's reporting of ugly and below expectation economic data that pushed US stock futures ultimately higher, today it will be Europe's modest economic data beats that will send futures, where else, higher, and result in the Dow Jones breaking its nominal all time highs at the open or shortly thereafter. Following the Chinese economic update in its State of the Union address, which as we reported earlier, saw China set more moderate growth targets for itself resulting in the SHCOMP nearly wiping out Monday's losses, it was Europe's turn to shine which it did following the report of various Service PMI, which unlike last week's horrible manufacturing PMI data, were better than expected with the natural exception of Spain which printed at 44.7, well below the January 47.0, the first drop since September driven by the sharpest job losses since March of 2009, and Italy which dropped from 43.9 to 43.6, same as expected. The core countries' Services PMI beat: France coming at 43.7, on expectation of an unchanged print from last month's 42.7, and Germany printing at 54.7 vs also an expectation of an unchanged 54.1. Not very surprisingly, however, it was not the EURUSD which benefited the most from this data, which has lost nearly 50 pips from its overnight highs following the better economic news, but the various equity futures which have one centrally-planned goal: to take out all time DJIA highs or else, and unless something changes in the next three hours, precisely this will happen.
Gundlach Says Stocks "Obviously Overbought", Buys "More Long-Term Treasuries In Last Month Than In Four Years"Submitted by Tyler Durden on 03/04/2013 15:15 -0500
Doubleline's Jeff Gundlach must not be a GETCO algo because unlike the algorithmic programs who are all that's left of traders in this policy farce of a manipulated market and who are programmed to BTFD especially when there is a massive stop hunt program about to be unleashed on 10-20 ES contracts, he is not buying stocks. Instead the bond manager has closed his July 2012 call when he called the top in Treasurys, and told Reuters that he has bought "more long-term Treasuries in the last month" than in the last four years." And this coming form the so-called new "bond king." Gundlach said he started buying benchmark 10-year U.S. Treasury notes in the last month after yields popped above 2 percent, because he sees value there relative to other asset classes, including stocks, which he said are "overbought."
- Must defend against Chinese colonial expansion and get the Nigerian oil: U. S. Boosts War Role in Africa (WSJ)
- BOJ nominee Kuroda sets out aggressive policy ideas (Reuters)
- China becomes world’s top oil importer (FT)
- Baby Cured of HIV for the First Time, Researchers Say (WSJ)
- Obama to nominate Walmart's Burwell as White House budget chief (Reuters)
- Wal-Mart Anxious to Combat Amazon’s Lead in Web Vendors (BBG)
- Nasdaq executing trades at a loss (FT)
- Spending cut debate casts pall over Obama's second-term agenda (Reuters)
- Russell Indexes to Reclassify Greece as Emerging Market (BBG)
- Bond Bears Collide With Swaps Showing Low Rates (BBG)
- Buffett Deputies Leaving Billionaire in the Dust Get More Funds (BBG)
- Brazil's leftist president fights to win back business (Reuters)
- U.S. Special Forces train Syrian Rebels in Jordan (Le Figaro)
- Carlos Slim Risks Losing World’s Richest Person Title as Troubles Mount (BBG)
This is just the latest revelation in the stealth inflation and food fraud theme we have written about frequently in recent months. The non-profit group Oceana took samples of 1,215 fish sold in the U.S. and genetic tests found that that 59% of those labeled tuna were mislabeled. It seems that “white tuna” should be avoided in particular as “84% of fish samples labeled “white tuna” were actually escolar, a fish that can cause prolonged, uncontrollable, oily anal leakage.” Oh and if you live in New York City or Southern California, you should pay particular attention if you're heading to Sushi!!
It looks like the Dow Jones Industrial Average will be the first major U.S. equity benchmark to breach new highs, so ConvergEx's Nick Colas breaks down this closely watched measure of domestic stock prices noting that the Dow is a quirky “Index” – price weighted (not market capitalization), compact (30 names) and fundamentally global (lots of brand-name multinationals). Change just one name in the index, and the outcomes vary considerably. If Google had been added at the end of last year, we’d be at 14,330 – well over the old high of 14,165. But if the Dow committee had added Apple instead, the index would have closed at 13,475 yesterday, up less than 3% on the year. And if Netflix had been the lucky company added for 2013, well… We’d be saying hello to Dow 15,000, and then some. The point here is that the notion of a “New High” for the Dow is a little arbitrary, by virtue of the price weighting function and stock selection process.
Big name brand banks push 75% loss ponzi schemes, yet everybody still flocks to work, and do business, with them. The term Muppet is a compliment!
Apple is under pressure this morning -1.8%. It has broken recent lows and is traversing the gap from 1/24/12 (meaning if you bought at any time after that you are now losing money - and notably relative to the market). These are 13-month lows - great buying opportunity we are assured by Topeka et al. Just think, an iWatch, iTV, iDunno...
- US braced as cuts deadline passes (FT)
- U.S. stares down start of steep "automatic" budget cuts (Reuters)
- Yeltsin-Era Tycoons Sell Resources for Distance From Kremlin (BBG)
- Italy's center-left leader rules out coalition with Berlusconi (Reuters)
- Apple Required Executives to Hold Triple Their Salary in Stock (WSJ)
- BOJ Seen Spiking Punchbowl in April Under New Chief Kuroda (BBG)
- Diplomatic fallout from EU bonus cap (FT)
- Italy’s Stalemate Jeopardizes Resolution of Crisis, Finland Says (BBG)
- Chinese trader accused of busting Iran missile embargo (Reuters)
- JPMorgan No. 1 Investment Bank Amid a Flurry of New Deals (BBG)
- Eurotunnel’s Ferry Strategy at Risk as Rivals Cry Foul (BBG)
- Telepathic rats team up across continents (FT)
The cuts for the balance of the fiscal year come to $42b; an amount that is equivalent to 45 points on Apple’s market capitalization. Not a big deal??
- Grillo kills move to break Italy deadlock (FT)
- Abe nominates Kuroda to run BoJ (FT)
- More WMT bad news: Wal-Mart Chief Administrative Officer Mars to Leave: WSJ (BBG)
- Japan's Abe: Islands Are Indisputably Ours (WSJ) - Except for China of course
- Low-key departure as pope steps down, to enter the final phase of his life "hidden from the world" (Reuters)
- Cuts unlikely to deliver promised budget savings (Reuters)
- European Union caps bankers’ bonuses (FT)
- White House, Republicans dig in ahead of budget talks (Reuters)
- Jockeying Stalls Deal on Cuts (WSJ)
- Argentina Says It Won’t Voluntarily Comply With Bond Ruling (BBG)
- Italian president says forming new government cannot be rushed (Reuters) - or happen at all
- Central Banks Spewing Cash Must Plan Exit Timing, Rohde Says (BBG)
- China Regional Targets Cut in Sign Debt Concerns Heeded (BBG)
- RBA Says Up to 34 Central Banks Holding Australian Dollars (BBG)
Bernanke gave more testimony on Wednesday emphasizing and defending all Fed policies. He successfully parried all questions about QE and ZIRP risks and made no mention of any policy exit dates. Bulls translation, the printing press will be on “auto” to infinity.
Interesting testimony tidbits were:
“Fed could go some time without sending profits to Treasury,” (Fed is allowed to be a deadbeat).
“Savers will benefit with economic recovery; savers won't get strong returns in a weak economy,” (So not in my lifetime?).
- Italy sold EUR 6.5bln in 5y and 10y BTPs this morning, solid b/c and competitive yields, especially when considering the uncertain political situation in Italy.
- Moody's also said that Italian election is indirectly credit negative for other pressured EU sovereigns.
- Fears rise that ECB plan has a weakness as the strings in the Eurozone bond buying programme may be its frailty.
- Wal-Mart's Sales Problem—And America's (WSJ)
- Investors fret that Italy may undermine ECB backstop (Reuters)
- Monti Government Mulls Delaying Monte Paschi Bailout (BBG)
- Norway Faces Liquidity Shock in Record Redemption (BBG)
- ECB's Praet Says Accommodative Policy Could Lose Effectiveness (BBG)
- EU Chiefs Tell Italy There’s No Alternative to Austerity (BBG)
- New Spate of Acrimony in congress As Cuts Loom (WSJ)
- BOE's Tucker hints at radical growth moves (FT)
- Kuroda Seen Getting DPJ Vote for BOJ, Iwata May Be Opposed (BBG)
- Russian Banks Look to Yuan Bond Market (WSJ)
- Dagong warns about rising debt (China Daily)
- Italy Election Impasse Negative for Credit Rating, Moody’s Says (BBG)
With little on the event calendar in the overnight session, the main news many were looking forward to was Italy's auction of €2.5 billion in 5 and €4 billion in 10 year paper, to see just how big the fallout from the Hung Parliament election was in the primary market. As SocGen explained ahead of the auction: "The target of Italy's 2017 and 2023 BTP auction today is a maximum EUR6.5bn, but in order to get to that tidy amount the Tesoro may be forced to offer a hefty mark-up in yield to compensate investors for the extra risk. Note that Italian 6-month bills were marked up at yesterday's sale from 0.731% to 1.237%. Who knows what premium investors will be asking for today for paper with the kind of duration that is not covered by the ECB OMT (should that be activated)? Will Italian institutions, already long BTPs relative to overall asset size, be forced to hoover up most of the supply?" The outcome was a successful auction which, however, as expected saw yields spike with the 4 year paper pricing at 3.59% compared to 2.95% before, while the 10 Year paper priced some 60 bps wider to the 4.17% in January, yielding 4.83%. The result was a brief dip in Italian OTR BTP yield, which have since retraced all gains and are once again trading in the 4.90% range on their way to 5%+ as JPM forecast yesterday. And as expected, talk promptly emerged that the auction was carried by "two large domestic buyers" in other words, the two big local banks merely levered up on Italian paper hoping furiously that they are not the next MF Global.
Ben was in congress campaigning er, testifying mostly about the effectiveness of all things ZIRP and QE. He was grilled about possible risks with QE especially if interest rates should rise. The Bernank saying that interest rates would rise was unlikely but he then cavalierly stated if rates rise, the Fed would just “hold back on payments” er, stiff the Treasury. That’s no big deal for him since by then he’ll be down the road writing his memoirs, making speeches and joining some big Wall Street firm as a well-paid consultant. The Bernank was also asked if he noted any bubbles or market excess and said he saw none.