Japan

The Market Has Spoken: The Fed Made A Policy Mistake And "Quantitative Failure" Looms - What Comes Next

"Since the risk of Quantitative Failure brings with it the risk of more extreme policies/politics in 2016, the natural hedges are gold & volatility. Gold in particular will be interesting to watch in coming months. The Fed’s determination to raise rates means gold prices should fall. If in contrast gold rises with Fed hikes that’s a clear sign of a “policy mistake” and investors anticipating the need for more inflationary policies next year."

Dow Dumps 500 Points From Post-Yellen Highs Amid "Policy Error" Fears

Just in case yesterday's weakness was mistaken for "well, it's just stabilizing before the next leg higher," US equity markets are pooping the bed this morning with the Dow down over 500 points from its post-Yellen highs, FANGs plunging red, credit collapsing, and bond yields slumping. Between the widely watched quad-witching, Fed policy error concerns, and the utter failure of the Bank of Japan's efforts to save the world, global stocks and bonds are flashing red warnings for the end of centrally planned markets.

Japanese Jawboning Fail - Nikkei Crashes 1000 Points From Overnight Highs

For a brief few minutes, overnight saw exactly the reaction that central planners had hoped for when The Bank Of Japan announced it would buy 'moar' stock ETFs and extend bond duration buying ad nauseum. However, within just 15 minutes something happened that we haven't seen since the world embarked on this experimental nightmare. Despite the front-ran promises to buy Japanese stocks "whatever it takes" traders sold... and sold large.

Frontrunning: December 18

  • Oil heads for third straight weekly loss as supply weighs (Reuters)
  • BOJ's $2.5 Billion ETF Boost Seen Having Little Impact on Stocks (BBG)
  • Japan core CPI seen flat in November, household spending down (Reuters)
  • Dollar gets altitude sickness as BOJ disappoints (Reuters)
  • Fed Hikes, but Some Rates Veer Lower (WSJ)
  • White House calls for 'common sense steps' to help Puerto Rico (Reuters)

Futures Slide As Quad-Witching Has A Violently Volatile Start After Massive BOJ FX Headfake; Oil Tumbles

Following the latest BOJ statement, the market found itself wrongfooted assuming the BOJ was actually launching another episode of easing, sending the USDJPY soaring, until suddenly the realization swept the market that not only was the incremental action not really material, but even Kuroda spoke shortly after the announcement, confirming that "today's decision wasn't additional easing." The result was one of the biggest FX headfakes in recent days, perhaps on par with that from December 4 when EUR shorts were crushed, as the biggest carry pair first soared then tumbled and since the Yen correlation drives so many risk assets, also pulled down not only Japanese stocks but US equity futures.

"Just Wait For The Bankruptcies" - The Latest Market That "Is In Real Trouble"

Natural-gas fell to the lowest ever inflation-adjusted price in its history of NYMEX trading on Wednesday as extremely warm weather continues to limit demand. As we recently explained, the glut in nattie is worse than that facing the crude complex, and while the glut in oil is expected to continue for the next year or so before balancing in late 2016, the pain for liquefied natural gas (LNG) could be just beginning. As one trader warned "this market is in real trouble...just wait for the bankruptcies."

What If Economists Applied Their Own Theories... To Themselves

It appears that a main preoccupation of economists – the self declared “behavioral economists” prominent among them – is to show how dumb people are as consumers and in assessing risks. Drawn to logical conclusion, this implies that economists, advising benevolent dictators are the solution. In ancient Greece people flocked to oracles and sought guidance.; today, Councils of Economic Advisers, IMF, OECD, Nobel prizes sustain perceptions that "macro- strology" and much else of what economists do is "science."

Global Stocks, Futures Continue Surge On Lingering Rate Hike Euphoria

Heading into the Fed's first "dovish" rate hike in nearly a decade, the consensus was two-fold: as a result of relentless telegraphing of the Fed's intentions, the hike is priced in, and it will be a "dovish" hike, with the Fed lowering its forecast for the number of hikes over the next year. Consensus was once again wrong on both accounts: first the rate hike was far more hawkish than most had expected (see previous post), and - judging by the surge in Asian, European stocks and US equity futures - the "market" simply is enamored with such hawkish hikes which will soon soak up trillions in liquidity from the financial system.

Today Will Be A Watershed Moment For Financial Markets

We have reached the apogee of history’s greatest credit inflation. Now we’re hurtling into a prolonged worldwide deflation. You can already see this deflation in the plunge of oil, iron ore, copper and other commodity prices. We are in uncharted waters after nearly 20 years of madcap money printing by the Fed and other central banks. The world’s central banks are finally out of dry powder. They no longer have the means to inflate the global credit and financial bubble. That’s why today’s FOMC meeting is the most crucial inflection point since 1929.

Global Stocks, US Futures Greet Historic Fed Day With Euphoria

The day has come when the boxed-in Fed has no choice: with the vast majority of the market expecting a rate hike, Yellen has to deliver or suffer a crushing confidence blow like no other. And deliver she will, with expectations that said hike will be "as dovish as possible." For now however, the market is desperate to convince itself that just as more easing and more QE were bullish for the market, so rate hikes are just as bullish. Recall from late 2013: "tapering is not tightening," then the 2015 version of this refrain is "tightening is not tightening."