Now that the 3:30 pm pump has been exposed to the world, and having been priced in and frontran (such as yesterday) it changed to the 3:30 dump, algos are desperately searching for another daily calendar trading opportunity. It appears the opening of Europe and Japan for trading are just these two much needed "fundamental" catalysts. As the charts below show, it appears there is nothing more bullish for the two key carry pairs, the USDJPY and the EURUSD, than Japan opening at 8pm Eastern, and then Europe opening next, at 3:30 am Eastern.
“Mad Dog” Bluff Based on Fear of U.S.-South Korean War Games Turning Into Real Invasion
The boy who cried wolf is now openly screaming "global thermonuclear war." No, really. AFP reports that North Korea said Tuesday the Korean peninsula was headed for "thermo-nuclear" war and advised foreigners to consider leaving South Korea, as the UN chief warned of a potentially "uncontrollable" situation. "Tuesday's advisory -- greeted largely with indifference -- followed a similar one last week to foreign embassies in Pyongyang, to consider evacuating by April 10 on the grounds war may break out. "The situation on the Korean Peninsula is inching close to a thermo-nuclear war," the Asia-Pacific Peace Committee said in a statement carried by the North's official Korean Central News Agency." The result - a big yawn, which sadly for Kim Junior is the worst reaction. After all what is a dictator with an inferiority complex and a laughable military to do to get some respect around here and score some "nuisance value" cash from the superpowers (which has been his entire plan all along).
Here is a short quiz for you. Ready?
- What’s the current situation with Lindsay Lohan’s rehab?
- Who won the latest “Dancing With the Stars”?
- Name five celebrities with “baby bumps.”
- Explain how the Cypriot banking crisis could impact the European economy.
If you answered the first three questions but are clueless on the fourth, you’re in good company. Estimates are that up to half the population in America is ignorant about the situation in Cyprus. Oh sure, they hear snippets on the evening news, but since it’s far away and happening to other people, they don’t worry about it. There are many people who just can’t “see” anything wrong with our country. People continue to cling to the notion that our leaders are working for us, not for themselves. So people sit on their butts watching “American Idol” or reading about celebrity baby bumps. Can the U.S. economy crash? Nah. It can’t happen here.
April 5th, 1933, FDR confiscated every gold coin, bar, or certificate and people had to turn in their gold to the Federal Government or else they would face a fine of $10,000 or 10 years in jail. That is about $179,000 in today’s money. You were able to keep a small amount or some rare coins and those that did give up their gold received about $20/oz. “Why would the government do that?” asks Ms. Steel. They did this for the following reasons:
- To prevent hoarding.
- To devalue the dollar during the Great Depression.
- The government set the gold price at $35/oz and pegged it to the dollar.
“But this could never happen again, right?” asks Ms. Steel. “Well tell that to Texas.”
We started off the overnight session with various pseudo-pundits doing the count-up to a 100 in the USDJPY. It was only logical then that moments before the 4 year old threshold was breached, the Yen resumed strengthening following comments from various Japanese politicians who made it appear that the recent weakening in the currency may suffice for now. This culminated moments ago when Koichi Hamada, a former Yale professor and adviser to Japanese Prime Minister Shinzo Abe, told Reuters that level of 100 yen to dollar is suitable level from the perspective of competitiveness. The result has been a nearly 100 pip move lower in the USDJPY which puts into question the sustainability of the recent equity rally now that the primary carry funding pair has resumed its downward trajectory. Another result is that the rally in the Nikkei225 was finally halted, closing trading unchanged, and bringing cumulative gains since the morning before the BoJ’s announcement last Thursday to 8.9%. Over that the same time period, the TOPIX Real Estate Index is up an incredible 24%, no doubt reflecting the prospect of renewed buying of REIT stocks from the BoJ’s asset purchasing program.
The week ahead is light on major market moving data releases. From a policy perspective and in light of the recent moves in treasuries, FOMC minutes are likely to be followed by markets. Retail sales in the US are likely to print below consensus both on the headline and on the core metrics. That said, this needs to be seen against the backdrop of first quarter retail consumer spending data surprising to the upside. Producer prices are also likely to come in on the soft side of market expectations. Finally, do not expect large surprises from the U of Michigan consumer confidence.
- Finally the MSM catches up to reality: Workers Stuck in Disability Stunt Economic Recovery (WSJ)
- China opens Aussie dollar direct trading (FT)
- National Bank and Eurobank Fall as Merger Halted (BBG)
- Why Making Europe German Won’t Fix the Crisis - The Bulgarian case study (BBG)
- Nikkei hits new highs as yen slides (FT)
- Housing Prices Are on a Tear, Thanks to the Fed (WSJ)
- Why is Moody's exempt from justice, or the "Big Question in U.S. vs. S&P" (WSJ)
- Central banks move into riskier assets (FT)
- N. Korea May Conduct Joint Missile-Nuclear Tests, South Says (BBG)
- North Korea Pulls Workers From Factories It Runs With South (NYT)
- Illinois pension fix faces political, legal hurdles (Reuters)
- IPO Bankers Become Frogs in Hot Water Amid China Market Halt (BBG)
- Portugal Seeks New Cuts to Stay on Course (WSJ)
With every modestly positive datapoint being desperately clung to, now that even Goldman's Hatzius has once more thrown in the economic towel after proclaiming an economic renaissance in late 2012 just like he did in late 2010 only to issue a mea culpa a few months later (and just as we predicted - post coming up shortly), the key prerogative is to ignore the elephant in the room. That, of course, is that the JPY 1 quadrillion bond market had to be halted for the second day in a row as the Japanese capital markets are fast becoming a very big and sad joke. The resulting flight to safety from Japanese investors, who sense that their own bond market is on the verge of breaking down completely, has managed to send French and Belgian bonds to record lows, the Spanish 2 Year to sub 2%, the German 6 month bill negative in the primary market, the US 10/30 year constantly bid and so on. The immediate result is that the bond-equity disconnect continues to diverge until one day we may get negative 10 Year rates coupled with an all time high stock market. Gotta love the fake New Normal market, in which the Japanese penny stock market was up another 2.8% to well over 13,000 even as the Shanghai Composite plumbs ever redder territory for 2013 on fears the birdflu contagion will hurt the already struggling economy even more.
A big picture look at the drivers of the global capital markets.
First the US fanfared the placement of two F-22 Raptors in the Osan airbase of South Korea. Then it demonstratively launched a B-2 stealth bomber on a training mission over a South Korean gunnery range. Then it deployed an anti-ballistic missile defense system to Guam and positioned two guided-missile destroyers in the waters near Korea. And now, courtesy of the Aviationist, we learn that the Pentagon has escalated once more in an ongoing cat and mouse game with North Korea, of who blinks first, and dispatched several B-1 ("Bone") Lancer strategic long-range bombers to Andersen Air Force Base in Guam. What is different this time, however, is that unlike the previous very public and widely trumpeted reciprocal escalation steps, this particular deployment has been kept secret from the public (at least the broader public), "a fact that could be the sign that the U.S. is not only making symbolic moves (as the above mentioned ones), but it is preparing for the worst scenario: an attack on North Korea."
Uninsured Deposits Could Be Used In Future Bank Failures Says Influential CEO Of Italy's Largest BankSubmitted by GoldCore on 04/05/2013 10:02 -0400
The CEO of Unicredit Federico Ghizzoni said yesterday that uninsured deposits could be used In future bank failures. He said that the savings which are not guaranteed by any protection or insurance could be used in the future to contribute to the rescue of banks who fail and that uninsured deposits could be used in future bank failures provided global policy makers agree on a common approach.
- George Soros: 'What Japan is doing is actually quite dangerous because" (BBG)
- North Korea lacks means for nuclear strike on U.S., experts say (Reuters)
- Yellen latest to hint about slowing of QE3 (FT)
- Hollande approval rating hits new low (FT)
- Hollande Dismisses Reshuffle as Crisis Hits Popularity (BBG)
- Japan Upper house approves full 5 year term for BOJ gov. Kuroda (BBG)
- US: Plan to Cap Tax Breaks Is Gaining Steam (WSJ)
- BOE Says Investors May Be Taking ‘Too Rosy’ a View of Stress (BBG)
- Kiwis Say ‘Ni Hao’ as China Ties Trump Australia Sales (BBG)
- Obama Avoids Trading Threats With North Korea’s Kim (BBG)
Today saw a massive short covering trade occur in the US Treasury market. Is this a trade to fade??
With all three major non-Fed central banks on the tape today, all economic data will be merely "noise" as the market digests what the central-planners' intentions are. The BOJ came and went, and following its substantial balance sheet expansion announcement, which many called "shocking and awing" the USDJPY has pushed higher by 2.5 big figures, although not reaching the 96 levels seen prior to Kuroda's actual announcement. In fact, from this point on there is likely downside as Japan's biggest export competitor, South Korea, has no choice but to join the race to debase which in turn will be JPY-positive. The Bank of England is next, which as expected did nothing moments ago, and will keep doing nothing until Carney joins officially this summer. In some 45 minutes, the ECB headlines will hit the tape where Draghi may bur more likely may not lower deposit rates, and instead will focus on recent deterioration in the economy. None of this will be surprising, and the EUR continues to trade sufficiently weak in line with sub-200DMA levels seen in the past few weeks. What we look forward to the most will be Draghi once again discussing the legal term-sheet details of the ECB's OMT program. His answer will be amusing as there still is no answer, and the OMT is for all intents and purposes the biggest straw man ever conceived by a central bank.