- Saudi Arabia’s New King Probably Will Not Change Current Oil Policy (BBG)
- Saudi King’s Death Clouds Already Tense Relationship With U.S. (WSJ)
- Oil Pares Gains as New Saudi King Says Policies Stable (BBG)
- Kuroda Says BOJ to Mull Fresh Options in Case of More Easing (BBG)
- U.S. pulls more staff from Yemen embassy amid deepening crisis (Reuters)
- Putin Said to Shrink Inner Circle as Hawks Beat Billionaires (BBG)
- A Few Savvy Investors Had Swiss Central Bank Figured Out (WSJ)
Euro Crash Continues Sending Stocks Higher, Yields To Record Lows; Crude Stabilizes On New King's CommentsSubmitted by Tyler Durden on 01/23/2015 07:03 -0500
Today's market action is largely a continuation of the QE relief rally, where - at least for the time being - the market bought the rumor for over 2 years and is desperate to show it can aslo buy the news. As a result, the European multiple-expansion based stock ramp has resumed with the Eurostoxx advancing for a 7th day to extend their highest level since Dec. 2007. As we showed yesterday, none of the equity action in Europe is based on fundamentals, but is the result of multiple expansion, with the PE on European equities now approaching 20x, a surge of nearly 70% in the past 2 years. But the real story is not in equities but in bonds where the perfectly expected frontrunning of some €800 billion in European debt issuance over the next year, taking more than 100% of European net supply, has hit new record level.
Just two days ago we detailed the possibility that Russia could accelerate debt repayment on a $3 billion loan it granted to Ukraine that has broken its covenants. While there is no word yet from Russia on a decision whether to demand the payment, it appears, as Reuters reports, the US taxpayer - just as we warned - is quite willing to step up (thanks to their leaders in Washington) and guarantee $2 billion in loans to the world's 2nd most credit risky nation (after Venezuela).
Goldman Sachs expects nonfarm payroll job growth of 230k in December, slightly below the consensus forecast of 240k. Labor market indicators continue to point to a strong pace of employment gains, but softened on balance in December. In particular, jobless claims rose modestly and the employment components of service sector business surveys weakened somewhat. With respect to wages, we expect a softer +0.1% gain in average hourly earnings following an unusually large gain in November. On balance, labor market indicators looked somewhat softer in December, but remain consistent with a solid trend rate of employment growth.
While the vast majority of mainstream economists and analysts currently expect 2015 to be another robust year for the economy and the markets, there is a rising risk to that forecast. If oil prices, a reflection of global economic demand, remains depressed for a considerable period of time, the negative impacts of loss of employment, reductions in capital expenditures and declines in corporate profitability could outstrip any small economic benefit gained from lower oil prices. As we stated previously, for those who have lived in Texas long enough to remember the oil rout in the early 80's, the greatest fear in 2015 is that oil prices remain low.
Markit's US Services PMI missed expectations of 53.7, priting at 53.3, its lowest since Feb 2014 (mid Polar Vortex). From record highs in June, PMI has plunged non-stop for six months leaving Markit noting Q4 growth is looking more like 2.0% than the 5.0% exuberance in Q3.
- Average 10-year yield of U.S., Japan and Germany dropped below 1% for the first time ever: Free Money in Bond Markets Shows Global Economy Still Struggling (BBG)
- Brent falls below $52 as oil hits new five and a half year lows (Reuters)
- China Fast-Tracks $1 Trillion in Projects to Spur Growth (BBG)
- Saudi Arabia Raises Price of Main Oil Grade for Asian Buyers (BBG)
- Oilfield Writedowns Loom as Crude Slump Guts Drilling Values (BBG)
- Biggest Oil-Rig Drop Since 2009 Spells Tough Year Ahead (BBG)
- CIA says its inspector general is resigning at end of month (Reuters)
- Pipeline IPOs Climb on Demand for Returns Immune to Oil (BBG)
- Natural Gas No Savior for Investors Seeking Oil Refuge (BBG)
- Euro zone economy ended 2014 in poor shape (Reuters)
Same slide, different day, as the crude crash continues, with both WTI and Brent tumbling to multi-year highs, below $49 and $52 respectively. This happened despite the news overnight that China is accelerating 300 infrastructure projects valued at 7 trillion yuan ($1.1 trillion) this year, suggesting that China will focus more on fiscal policy than monetary easing, which in turn led to much confusion in the SHCOMP, which fluctuated up and down for the day several times before finally closing unchanged. There was no confusion about the stops slamming USDJPY, and its Nikkei225 derivative which tumbled 3%, sending Japanese Treasury yields to fresh record lows. Record low yields were also seen in Germany, Austria, Belgium, Netherlands, Finland, France (and many other places), which in turn forced the US 10 Year to finally dip back under 2.00%. In fact, taken together, the average 10Y bond yield of the U.S., Japan and Germany has dropped below 1% for the first time ever, according to Citi.
So much for that whole "decoupling" meme... Just as China and then Europe saw weakness in their manufacturing PMIs, so the US data just hit, printing 53.9 (missing expectations modestly) and falling for 4 straight months to the lowest since January 2014's Polar Vortex. Production volumes are also the weakest since Jan 2014 and the employment sub-index collapsed. Markit warns, "this suggests a slowdown could become more entrenched."
- The year of dollar danger for the world (Ambrose Evans-Pritchard)
- Draghi Says ECB Prepares Action as Deflation Risk Non-Negligible (BBG)
- Obama Pivots to Lawmakers: New Plan to Advance Policy Goals by Working With Congress Draws Skeptics (WSJ)
- Affordable Care Act Creates a Trickier Tax Season (WSJ)
- Oil pares early gains, trades near $57 as supply glut prevails (Reuters)
- Iran says Saudi Arabia should move to curb oil price fall (Reuters)
- Pimco Fund Trails Peers in 2014 After Missing Rally (BBG)
- Piketty rejects Légion d’Honneur award (FT)
- UK manufacturing activity hits three-month low (BBC)
Draghi Launches New Year With More QE Jawboning, Sending Euro To New 4 Year Low, Yields Lower, US Futures HigherSubmitted by Tyler Durden on 01/02/2015 07:00 -0500
The new year has officially started because it wasn't even a day in and Mario Draghi was once again out and about, jawboning the Euro to a lower level than where it was when he said back in 2012 he would do "whatever it takes" to push it higher. The reason, as Reuters reports, why the Euro sank to a nearly 5 year low against the USD, was "clear indications that the European Central Bank will soon embark on outright money-printing." Actually, it was on just more hollow rhetoric by Draghi, who told German Handelsblatt that "the risk that we don’t fulfill our mandate of price stability is higher than it was six months ago." He also added that "it’s difficult to say” how much the institution will have to spend on government-bond purchases.
Shifting consumption from gasoline sales to retail sales does not create economic growth. It is just a "shift" in where the same dollars are spent. However, there has been much "hoopla" over the recent retail sales report for November that saw retail sales jump for the month by 0.7%. While on the surface this appears to be a strong retail sales report, a quick look below the surface quickly destroys that claim.
"Q4 GDP Below 2%, December Payrolls Under 200,000" Markit Warns As Service PMI Crashes To 10-Month LowSubmitted by Tyler Durden on 12/18/2014 09:54 -0500
"Another bumper month of non-farm payroll growth looks unlikely in December, with private sector payroll growth unlikely to breach the 200,000 mark," warns Markit after The US Services PMI plunged to 53.6, missing expectations of 56.3 by the most on record. This is the 6th straight month of declines. Job creation slumped to 8-month lows. The Composite (Services & Manufacturing) PMI plunged to its lowest level since October 2013. Still exuberant? Still hopeful? Here's Markit's summary, "A sharp slowing in service sector activity alongside a similar easing in the manufacturing sector takes the overall rate of economic expansion down to the weakest since October 2013. The extent of the slowdown suggests that economic growth in the fourth quarter could come in below 2%"
- Swiss National Bank Starts Negative Interest Rate of 0.25% to Stave Off Inflows (BBG)
- Putin Strikes Uncompromising Stance Over Crisis Gripping Russia (BBG)
- Sony cancels North Korea movie in apparent win for Pyongyang hackers (Reuters)
- U.S. Said Set to Blame North Korea for Sony Cyber Attack (BBG)
- China’s Short-Term Borrowing Costs Surge as Demand for Money Grows (WSJ)
- Russia Currency Market Bends But Doesn’t Break (BBG)
- Jeb Bush Puts Pressure on Chris Christie for 2016 (WSJ)
- From joy to outrage, Florida's Cuban-Americans greet new U.S. policy (Reuters)
- Russians Quit London Luxury Homes as Only Super-Rich Stay (BBG)
After drifting unchanged for much of the overnight session, US futures exploded higher shortly after the previously noted SNB's NIRP announcement, which took place at 2 am eastern, which made it explicit that yet another banks will herd the bouncing dead cats right into new all time stock market highs, and following the European open, were carried even higher as the global "risk-on" momentum ignition algos woke up, spiking all recently depressed assets higher, including energy as Brent rose almost 3% despite Saudi Arabia’s oil minister Ali al-Naimi once again saying "it is difficult if not impossible" for OPEC and his kingdom to reduce output.