Market Wrap: Evans' "Catastrophe" Comment Blasts Overnight Futures Into Overdrive, 10-Year Rises To 2%Submitted by Tyler Durden on 01/08/2015 06:56 -0500
After subdued trading in the overnight session until a little after 8pm Eastern, algos went into overdrive just around the time the Fed's 2015 voting member and uberdove Charlie Evans told reporters that "raising rates would be a catastrophe", hinting that the first rate hike would likely be - as usual - pushed back from market expectations of a mid-2015 liftoff cycle into 2016 or beyond (but don't blame the US, it is the "international situation's" fault), in the process punking the latest generation of Eurodollar traders yet again. Whatever the thinking, S&P futures soared on the comments and were higher by just under 20 points at last check even as Crude has failed to pick up and the 10Y is barely changed at 2.00%.
"We’ve read a lot of silly articles since oil prices started falling about how U.S. shale plays can break-even at whatever the latest, lowest price of oil happens to be. Doesn’t anyone realize that the investment banks that do the research behind these articles have a vested interest in making people believe that the companies they’ve put billions of dollars into won’t go broke because prices have fallen? This is total propaganda."
Will 2015 be a year of financial crashes, economic chaos and the start of the next great worldwide depression? Over the past couple of years, we have all watched as global financial bubbles have gotten larger and larger. Despite predictions that they could burst at any time, they have just continued to expand. But just like we witnessed in 2001 and 2008, all financial bubbles come to an end at some point, and when they do implode the pain can be extreme.
"...we believe the current low crude oil price could be overkill and result in the next “Energy Crisis” by early 2016. Enjoy these low gasoline prices while they last."
Just when you thought it was all over... Having bounced post-CBR intervention and somewhat stabilized, the re-collapse in crude oil prices and continued weakness in Russian macro data provided just the impetus for a re-plunge in the Ruble (back above 63.5/USD) and surge in Russian bond yields (back to 14%). While Russian stocks are also retesting towards recent lows, it is Russian CDS that is the most telling as it closed to day at 595bps - the widest since March 2009. While these violent gyrations are new for recent history, they are not a new phenomenon, but are quite characteristic of the country’s financial history.
Think Texas and Pennsylvania have a problem with plunging oil prices, don't look North. West Canada Select (Heavy) crude oil prices have collapsed to below $35 per barrel (the lowest since Feb 2009). This is a 60% plunge in the last 6 months and has left the industry stunned. While US rig counts have fallen for the last few weeks as the lagged response to falling prices finally catches up to reality, the Canadian oil rig count has never been lower for the first week of January. Will the Canadian housing bubble be next?
As energy stocks continue to catch down to oil-price's incessant weakness, US energy company credit risk has surged back above 1000bps for the first time in 3 weeks. WTI Crude oil prices just traded to a $47 handle - the lowest since April 2009.
"Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying."
“Don’t look back - something might be gaining on you,” Satchel Paige famously warned. For connoisseurs of civilizational collapse, 2014 was merely annoying, a continued pile-up of over-investments in complexity with mounting diminishing returns, metastasizing fragility, and no satisfying resolution. So we enter 2015 with greater tensions than ever before and therefore the likelihood that the inevitable breakdown will release more destructive energy and be that much harder to recover from.
"Some folks are selling stocks..." and, according to The White House, President Obama is closely monitoring it. As The Hill reports, despite the meme that lower-oil-prices-are-unequivocally-good-news-for-Americans, the Obama administration is monitoring whether the fall in oil prices is affecting the US stock market. Just over 5 years ago, President Obama explained to the American public that "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal," so we can rest assured that our leaders are (for now) "hesitant" to say whether the fall of the stock market, which came as crude oil trades briefly dipped below $50, was related to oil prices.. so blamed Europe.
While the predictions of Blackstone's Byron Wien (born in 1933) have been all over the place in the last few years, they nevertheless provide some color on just what the mainstream does not believe... This is the 30th year Byron has given his views on a number of economic, financial market and political surprises for the coming year. From "our luck running out on cyberterrorism" to "shock and awe no longer working in Japan", Wien's non-predictions range from The Fed to China and from Oil to Hillary Clinton...
WTI crude oil prices are now down almost 55% from the June highs, the impossible just happened... WTI Crude broke into the $40s... the 6-month plunge is the largest since the pre-Lehman plunge and 2nd biggest plunge in 28 years.
While Bob Pisani last week told the world that he was "encouraged" by the decoupling of energy-related stocks from their basic raw material oil prices, today's rational response to fresh 5-year-lows in crude oil prices would suggest the 'most important thing' is to be "discouraged." Just how long did 'investors' think energy stocks and crude could remain decoupled... as the post-FOMC Yellen squeeze is erased rapidly...
The new year is not even a week old and already the volatility fireworks are off, as well as the continued commodity derisking. But while for now US stocks continue to be an island oasis in a turbulent global sea where GDP forecasts decline every single day, the same can not be said about either the Euro, which after crashing overnight to a 9 year low, and rebounding briefly, has continued to decline and is now once again flirting with a key support level, this time 1.19, last reached during the May 2010 first Greek bailout. The catalyst, as usual, Greece which may or may not be leaving the Eurozone shortly, as well as ongoing bets on ECB QE following this morning's regional German inflation data which declined once more and now hints at outright deflation in Europe's strongest nation.
2014 may go down as the year when gold and silver conspiracy “theories” became conspiracy “facts” as banks globally were found to have conspired to rig the prices of gold, silver, currency and many other markets.