Germany

Obamaworld is gone. We live again in an us-versus-them country in an us-versus-them world. And we shall likely never know another.

Between the French (Interior Minister Cazeneuve: "we're face with a new kind of terrorism", and Hungary (PM Orban: "allowing people into our own back yard" who may then commit acts of terrorism was irresponsible), AP reports that the EU's founding treaty with regard to passport-free travel - the so-called Schengen Agreement - is to be reformed. "We want Europe, which has lost too much time on a certain number of questions, to note the urgency and take decisions today," exclaimed Cazeneuve, with Orban adding "the founding treaty is currently an obstacle to this and I believe it needs to be reconsidered." According to Cazeneuve, the reforms will happen by year-end.

• French, U.S. Troops Enter Mali Hotel as Gunmen Hold Hostages (BBG)
• Top suspect seen on CCTV in metro during Paris attacks (Reuters)
• Paris Attacks’ Alleged Ringleader, Now Dead, Had Slipped Into Europe Unchecked (WSJ)
• Global shares march on as alarm bells ring for metals (Reuters)
• European Stocks Rise With Asian Shares as Zinc, Ringgit Advance (BBG)
• World leaders arrive for summit amid heavy security (Reuters)

China’s producers couldn’t get the prices they wanted anymore, as early as 4 years ago, and that’s where deflationary forces came in. No matter how much extra credit/debt was injected into the money supply, the spending side started to stutter. It never recovered.

1. Top Trade #1: Long USD vs short EUR and JPY
2. Top Trade #2: Long US 10-year ‘Breakeven’ Inflation
3. Top Trade #3: Long MXN and RUB versus short ZAR and CLP.
4. Top Trade #4: Long EM ‘External Demand’ vs. Banks stocks
5. Top Trade #5: Tighter Spread between Italy and Germany Long Rates
6. Top Trade #6: Long large-cap US Banks relative to the overall S&P500

The ECB has real policy choices they will have to choose between, and the implications are real. A further foray into negative deposit rates, extension and enlargement of QE, even a less likely change to the main financing rate. Each choice has externalities internally and is also likely to provoke a reaction from other affected countries. The Riksbank and SNB will be watching as closely as EGB traders. The ECB is in easing mode. The Fed plans to tighten. Relative value trades have further to play out

While it is still unclear just why the FOMC Minutes which are said to have made a December liftoff "more likely" unleashed a dramatic market rally, one which sent both stocks and TSYs higher, the sentiment continued overnight, with both Asian stocks surging on the US momentum, as well as Europe, where the DAX gapped solidly above the 200 DMA as most European shares advanced, led by resources, travel stocks. U.S. futures continue their ramp higher, and at last check were another 8 points, or 0.4%, in the green.  But if the Fed Minutes were enough to unleash the latest leg in this rally, than the ECB's own minutes due also today, should send futures back over 2100 without much difficult, regardless of their actual content.

Westerners have a deep history of a culture of myths (see Joseph Campbell).  We love to believe in Santa Claus, "The American Dream," the Tooth Fairy, housing market always goes up, and countless others.  So it's easy for us to be 'terrorized' by a myth; that hiding behind every corner are evil 'terrorists' waiting to blow themselves up because 'they hate our freedoms.' 

• Security jitters drive European investors back to safe havens (Reuters)
• Global Anti-ISIS Alliance Begins to Emerge (WSJ)
• Merkel says cancelling soccer match was 'responsible' decision (Reuters)
• Paris attacker may have had accomplice on journey through Balkans (Reuters)
• Drop Assad demands if you want to unite against Islamic State: Russia to West (Reuters)
• Putin sets up commission to combat terrorism financing (Reuters)

If this weekend's gruesome terrorist attack on Paris ended up being hugely bullish for stocks, then two subsequent events, a stadium-evacuation scare in Hannover (where Angela Merkel was supposed to be present) and a raid in north Paris which left several dead in the ongoing manhunt against the alleged ISIS mastermind, appear to have but some question into if not stocks then algos whether a rising wave of terrorist hatred across Europe is truly what central bankers need to unleash more QE. That said, we expect the current weakness to last only until the traditional USDJPY carry ramp pushes stocks traditionally higher.

Bombing wont stop them; it will just make more of them. Ironically, what can stop them is the Assad government and the ground forces of its Hezbollah and the Iranian Republican Guard allies. Its time to let them settle an ancient quarrel that has never been any of America’s business anyway. But Imperial Washington is so caught up in its myths, lies and hegemonic stupidity that it can not see the obvious. And that is why a quarter century after the cold war ended peace still hasn’t been given a chance and the reason that horrific events like last week’s barbarism in Paris still keep happening.

Hannover chief of police: "There was a device intended to be detonated inside the stadium... You don't know what a perpetrator is possibly planning. Don't stay in groups. Find safety."

Reports that German police have discovered a truck bomb disguised as an ambulance near football stadium in Hannover.