Initial Jobless Claims
So much for any Scottish referendum vote "surprise": the people came, they voted, and they decided to stay in the 307-year-old union by a far wider margin, some 55% to 45%, than most polls had forecast, even as 3.6 million votes, a record 85% turnout, expressed their opinion. The gloating began shortly thereafter, first and foremost by David Cameron who said "There can be no disputes, no re-runs, we have heard the settled will of the Scottish people." Queen Elizabeth II, who is at her Scottish castle in Balmoral, is expected to make a rare comment on Friday. But while a No vote was where the smart betting money was ahead of the vote anyway, and is thus hardly a surprise, the most curious thing overnight was the complete roundtrip of cable, which was bought on the rumor and then sold off on the news, roundtripping by nearly 200 pips.
Last week's "blip" higher in initial claims to over 300k - its highest in almost 3-months - has been demolished by the always-reliable, never-noisy data this week. At 280k, dramatically better than expectations of 305k, initial claims has only been lower once in the last 14 years... just don't tell Janet. The prior week was upwardly revised leaving a 36k drop this week - the biggest percentage drop since 2005. The all-important 4-week average is back under 300k and the labor department reports nothing unusual about this week's data... apart from the fact that non-seasonally-adjusted claims rose 6k to 241k.
Yesterday's market reaction to Yellen's commentary was curious: there was none, because when all was said and done the S&P and DJIA traded precisely where they traded just before the show began. Which, of course, was unacceptable, because one way or another the hawkish for the USD - the USDJPY just traded at the highest since 2008 - statement and conference had to be promptly interpreted for the algos as dovish for stocks - Futures are again just why of record highs - if not so much for the Fed-hated bonds, and sure enough, European equities traded in the green from the get-go even as RanSquawk notes, "there has been no major fundamental catalyst behind the spike higher seen in the morning, although do note that the move comes in the backdrop of the positive close on Wall Street which saw the S&P 500 (+0.13%) touch record highs before paring a large portion of the gains." In other words, the upside volatility in the intraday move is now a bullish catalyst, closing print notwithstanding. And what did US equity futures do? Why they followed Europe higher, with the ES now +8, on what is "explained" as a European move to intraday US futures previously. That, ladies and gentlemen, means we may have finally achieved perpetual motion, because all that would take to send the market higher is... for the market to go higher, etc, ad inf.
Forget the Siren calls of the impending end of days and the imminent collapse of civilization. Here is a non-polemical non-bombastic overview of three key events in the week ahead: FOMC meeting, TLTRO launch in Europe and the Scottish referendum.
While today's key news event will likely be the preannounced latest, third, round of anti-Russian sanctions and the Russian retaliation, the reality as DB notes, is that the market seems to be seeing "some fatigue" in this story with the ECB, Scotland and next week's Fed meeting taking center stage. As a result, and ahead of expectations of change in Fed language which should carry a more hawkish tone, the dollar has been bid up some more overnight, leading to fresh multi-year highs in the USDJPY, and the now-paired TSY trade, with 10Y yields up to 2.57%, although this may now be in short-term oversold territory. The latest Scottish poll appears to have dented some of the "Yes" momentum, with 52% of the polled saying they would vote No in the referendum, although right now neither side has a clear majority when factoring in the undecideds: which means it will come down to the wire next week, with clear implications for Europe's secessionist movements if the Yes vote still manages to prevail, not to mention massive ramifications for the UK.
For the 2nd week in a row, initial claims missed expectations and on the heels of last week's dismal payrolls data (which was "unbelievable" according to the smartest people in the room) it surged to 315k - the highest since June. Perhaps most critically, on both an adjusted and unadjusted basis, initial claims are highher year-over-year (SA 315k vs 307k, NSA 234k vs 229k respectively). Is this noise? It has been 7 weeks now from the mid-July lows... and the 4-week-average many look at, has risen for 4 of the last 5 weeks.
Quick update, and outline of reasons to suspect anxiety over Scottish independence has peaked.
Even as the NATO summit began hours ago in Wales, conveniently enough (for Obama) at the venue of the 2010 Ryder Cup, so far today geopolitics has taken a backseat to the biggest event of the day - the ECB's much hyped and anticipated announcement. So anticipated in fact that even as it has been priced in for the past month, especially by BlackRock which is already calculating the Christmas bonus on its "consultancy" in implementing the ECB's ABS purchasing program and manifesting itself in record low yields across Europe's bond market, Reuters decided to milk it some more moments ago with the following blast: "Plans to launch an asset-backed securities (ABS) and covered bond purchase programme worth up to 500 billion euros are on the table at Thursday's European Central Bank policy meeting..." The notable being the size of the program, which at €500 billion, is precisely what Deutsche Bank said a week ago the size of the ABS program would be. Almost as if the bank with the world's biggest derivative exposure is helping coordinate the "Private QE"...
Expect market participants coming back from vacation, and probably everything that worked in August will get “taken out to the woodshed” in September.
S&P Futures Surge Over 2000, At Record High, On Collapsing Japanese, European Economic Data, Ukraine EscalationsSubmitted by Tyler Durden on 08/29/2014 07:07 -0400
Following Wednesday's laughable tape painting close where an algo, supposedly that of Citadel under the usual instructions of the NY Fed, ramped futures just over 2,000 to preserve faith in central planning, yesterday everyone was expecting a comparable rigged move... and got it, only this time milliseconds after the close, when futures moved from solidly in the red, to a fresh record high in seconds on no news - although some speculate that Obama not announcing Syrian air strikes yesterday was somehow the bullish catalyst - and purely on another bout of algo buying whose only purpose was to preserve the overnight momentum. Sure enough, this morning we find that even as bond yields around the world continue to probe 2014 lows, and with the Ruble sinking to fresh record lows as the Ukraine situation has deteriorated to unprecedented lows, so US equity futures have once, driven by the now generic USDJPY spike just after the European open, again soared overnight, well above 2000 and are now at all time highs, driven likely by the ongoing deflationary collapse in Europe where August inflation printed 0.3%, the lowest since 2009 while the unemployment remained close to record high, while the Japanese economic abemination is now fully featured for every Keynesian professor to see, with the latest Japanese data basically continuing the pattern of sheer horror as we reported yesterday.
"Slack" or "no slack" - initial claims tumbling along the bottom of the lowest levels in a decade suggest the US economy's job creation is as good as it gets. Initial claims was stable at 298k (vs expectations of 300k) down very small from the 299k adjusted data for last week. Continuing claims rose 25k on the week and missed expectations but also continues to tread water at the lowest levels since 2007.
If you like your de-escalation, you can keep your de-escalation. To think that heading into, and following the Russia-Ukraine "summit" earlier this week there was so much hope that the tense Ukraine civil war "situation" would somehow fix itself. Oh how wrong that thinking was considering overnight, following rebel separatists gains in the southeast of Ukraine which included the strategic port of Novoazvosk and which is "threatening to open up a new front in the war" including setting up a land corridor to Russia controlled-Crimea, Ukraine's president Poroshenko for the first time came out and directly accused Russia of an "Invasion", or at least a first time in recent weeks, saying he has convened the security council on the recent Russian actions.
It is unclear exactly why stock futures, bonds - with European peripheral yields hitting new record lows for the second day in a row - gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the "de-escalation" algo as a meeting between Russia and Ukraine begins today in Belarus' capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn't say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).
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.
Following last week's surge back over the 300k Maginot Line, the Labor Department print this week is 298k (sigh of relief heard around the world). This is also the week that BLS surveys for the Augsut NFP print. Continuing claims fell once again to 2.500 million - the lowest print since June 2007. So great news... that explains why stocks are fading modestly off the highs in reaction.