- Fed’s Fisher Says Economy Strengthening as Payrolls Rise (BBG)
- Russia Knows Europe Sanctions Ineffective With Tax Havens (BBG)
- EU Cuts Euro-Area Growth Outlook as Inflation Seen Slower (BBG)
- U.S. Firms With Irish Addresses Get Tax Breaks Derided as ‘Blarney’ (BBG)
- Portugal exits bailout without safety net of credit line (Euronews)
- Puzzled Malaysian Air Searchers Ponder What to Try Now (BBG)
- Barclays, Credit Suisse Battle Banker Exodus, Legal Woes (BBG)
- Germany says euro level not an issue for politicians (Reuters)
- Alibaba-Sized Hole Blown in Nasdaq 100 Amid New Stock (BBG)
- Obamacare to save large corporations hundreds of billions (The Hill)
After months of ignoring events in Ukraine, HFT algos suddenly, if one for the time being, have re-discovered just where the former USSR country is on the map, and together with the latest economic disappointment out of China in the form of its official manufacturing PMI which missed expectations for the sixth month in a row, futures are oddly non-green at this moment now that talk of a Ukraine civil war is the new black (after two months of ignoring the elephant in the room... or rather bear in the room). Lighter volumes, courtesy of holidays in Japan and UK, have not helped the market breadth and stocks in Europe are broadly lower with the DAX (-1.33%) and CAC (-1.19%) weighed upon by risk off sentiment and market positioning for the eagerly anticipated ECB policy meeting especially after the EU cuts its Euro-Area 2014 inflation forecast from 1.0% to 0.8%. But what's bad for stocks continues to be good for equities, and moments ago the 10Y dropped to a paltry 2.57%, the lowest since February... and continuing to maul treasury shorts left and right.
As we noted on the last day of March, April was supposed to be the best month for stocks, with an average return since 1950 of over 2%. It wasn't.
It has been exactly six days in which algos, reversing the most recent drop in the S&P with buying sparked by a casual Nikkei leak that the BOJ may, wink wink, boost its QE (subsequently denied until such time as that rumor has to be used again), have pushed the market higher in the longest buying streak since September, ignoring virtually every adverse macroeconomic news, and certainly ignoring an earnings season that is set to be the worst since 2012. Today, the buying streak may finally end on rumors even the vacuum tubes are scratching their glassy heads if more buying on bad or no news makes any sense now that even the likes of David Einhorn is openly saying the second tech bubble has arrived. Keep an eye on the USDJPY which has had seen some rather acute "trapdoor" action in early trading and is approaching 102 after breaching its 55-DMA technical support of 102.38. If the support is broken here we go again on the downside. Keep an eye on biotechs and GILD in particular - if the early strength reverts into more selling again (after the two best days for the biotech space in 30 months), the most recent euphoria phase is now over.
Ask any European why their standard of living is so atrocious (after years of freeflowing debt-funded largesse) and the answer is well-known: austerity.Also ask any European if austerity means public debt should go up or down and the answer is also as clear: down. Which is why most Europeans will likely be confused to very confused when presented with the latest Eurostat data according to which not only did Eurozone debt rose remain just shy of all time record highs and certainly increasing from a year ago, but those PIIGS nations which are the first to blame austerity for everything, such as Greece (net of the debt wiped out as part of its 2012 bankruptcy of course), Portugal, Spain and Italy, all saw their public debt hit all time highs.
So what part of "All sides must refrain from any violence, intimidation or provocative actions," did the US not understand when they decided that deploying troops to Poland was in keeping with the four-party deal? As WaPo reports, Poland and the United States will announce next week the deployment of U.S. ground forces to Poland as part of an expansion of NATO presence in Central and Eastern Europe in response to events in Ukraine. As a reminder, we noted in December, Russia's placement of tactical nuclear-capable weapons near the Polish border which at the time sent a very clear message of escalation (despite the, at the time, lack of New Cold War headlines).
Consumer confidence slumps in the core and Ukraine fears weighed heavily on European stocks despite getting a push from the insanity in US equity markets this morning. Europe closed at their lows of the day led by Italy and Portugal stocks fading fast. It would appear that these worried investors greatly rotated into safe-havens such as Italian government bonds - which broke to their lowest yield on record today... makes sense right?
Overnight weakness in Asia spilled into Europe and the bloodbath is continuing - especially in the peripheral markets which have until now been invincible in the face of deteriorating fundamentals. Just like US hyper-growth hope, Portugal, Spain, and Italy stock markets have soared this year - among the world's best performers - but are getting monkey-hammered in the last 2 days (down over 5%). Despite more chatter of ECB QE, peripheral bond spreads are also jumping higher (+7bps) as German Bund yields are slumping back below 1.5% - the lowest in 10 months. US futures are ugly too.
There is a reasonably quiet start to the week before we head into the highlights of the week including the start of US reporting season tomorrow, FOMC minutes on Wednesday and IMF meetings in Washington on Friday. On the schedule for today central bank officials from the ECB including Mersch, Weidmann and Constancio will be speaking. The Fed’s Bullard speaks today, and no doubt there will be interest in his comments from last week suggesting that the Fed will hike rates in early 2015.
Being that markets are unrigged and all, at least according to every single proponent of HFT that is, futures have done their overnight levitation as they have every day for the past month driven by the one staple - the Yen carry trade - even if in recent days the broader market slump during the actual daytrading session mostly impacted biotechs yesterday. And since any news is good news, we don't expect today's main event, the ECB's rate announcement and Draghi press conference, both of which are expected to announce nothing new despite Europe's outright inflationary collapse which most recently dropped to 0.5%, the lowest since 2009.
European leaders may have felt a momentary brief lapse in the wary feeling of disdain that has existed between them for years now, but that was once exacerbated by the financial crisis and the entire PIGS- story that ensued, with the debt crisis.
Japanese real estate stocks were broadly speaking the worst global equity performers in the first quarter of 2014 along with broad weakness in Russia and China (note US consumer discretionary was the 25th worst equity index in the world). At the other end of the spectrum, the quarter belonged to everything Middle-Eastern with Dubai, Abu Dhabi, Egypt, and Qatar all soaring (along with - somewhat remarkably) Greece, Portugal, and Italy...
London’s cobbled and quaint streets are no longer paved with gold as their fictitious character, Dick Whittington might have once believed in fairytale land. But, they certainly do attract the golden billionaire boys from around the world these days as London gets to the top position in the places to have a pad; but you don’t necessarily need to live there!
After ramping in overnight trading, following the spike in Japanese stocks following another batch of disappointing economic data out of the land of the rising sun and setting Abenomics which sent the USDJPY, and its derivative Nikkei225 surging, US equity futures have pared some of the gains in what now appears a daily phenomenon. Keep in mind, the pattern over the past 6 consecutive days has been to ramp stocks into the US open, followed by a determined fade all the way into the close, led by "growthy" stocks and what appears to be an ongoing unwind of a hedge fund basket by one or more entities. Could the entire market be pushed lower because one fund is unwinding (or liquidiating)? Normally we would say no, but with liquidity as non-existant as it is right now, nothing would surprise us any more.
U.S. stocks are like a duck, floating on a quiet pond – calm above the surface, but lots of furious churning invisible to the naked eye. The S&P 500 looks like it will end the first quarter within a hair of the 1848 level where it started the year, but that doesn’t mean everything else is all stasis and light. Today we offer up a quick ‘Top 10’ list of surprises from the last 90 days. Gold, for example, is back from the grave, up 7.3%. So is an imperial Russia, with the biggest land grab since the building of the Berlin Wall. Mutual fund flows are ahead of exchange traded funds by a factor of 5:1. And most of those ETF inflows are into bond funds, not the “Great Rotation” we all expected into stocks. The 10-year U.S. Treasury yields all of 2.67%, and bonds have bested U.S. stocks consistently in 2014. First quarter 2014 may not have been a long trip, but it certainly has been strange.