Written by Gary
Premarkets specifically SPY, is flat and other premarket averages are down as much as -0.16%. The European markets are all in the red, the oils are trading sideways and the U.S. Personal spending and income reported lower than what analysts were expecting.
This morning we are providing an early look at the markets in hopes to have forward look into what is going to move the averages today. Let me know what you think and how we can improve it.
What Is Moving the Markets
|The negative outlook is still frontrunning.|
The usual stuff in Bill Gross’ latest monthly letter which could have been picked form the pages of Zero Hedge circa late 2009/early 2010, now that virtually all the “conspiracy theories” we first presented years ahead of everyone have not only been validated, but accepted as New Paranormal cannon.
None dare call it a “currency war” because that would be counter to G-10/G-20 policy statements that stress cooperation as opposed to “every country for itself”, but an undeclared currency war is what the world is experiencing. Close to the same thing happened in the 1930’s, a period remarkably similar to what many countries’ policies resemble today.
… the U.S. tailwind from competitive devaluation has since stalled â€” in fact the tailwind has now turned into a headwind. While it was once the only breed in the show, it now competes against better coiffured currencies with their own QE’s and promises to hold interest rates for lower and longer than does the U.S. Japan has a quantitative easing program 2 to 3 times greater than our own in comparative GDP terms and the ECB of course is about to embark on its own grand journey into the vast unknown of bond buying, yield lowering, and presumably further Euro currency devaluation.
The universe of negative yielding notes and bonds in Euroland now total almost $2 trillion. Not even “thin gruel” is being offered to our modern day Oliver Twist investors. You have to pay to come to the dinner table and then sit there staring at an empty plate.
But common sense would argue that the global economy cannot devalue against itself. Either the strong dollar weakens the world’s current growth locomotive (the U.S.) or else their near in unison devaluation effort fails to lead to the desired results, much like Japan experienced after its 50% devaluation against the Dollar beginning in 2012.
A more serious concern however, m …
It will hardly come as a surprise that with every asset manager in the past two months doing what they do best in the New Paranormal, namely frontrunning central banks, European assets, whether denominated in EUR of USD are some of the best performing assets. But which European assets? As the chart below shows, what came down – fast – in January, has since rebounded, on hopes that the Eurozone will preserve its current configuration for at least 4 more months, and sure enough, Greece has generated 20% returns in February alone, which means anyone who BTFD on January 31, and put all their funds in Athens stocks, can now take the rest of the year off. Then again, anyone who bought Greece on December 31, is now exactly where they were back then, actually slightly in the red.
On the other extreme, with over 20 central banks now aggressively easing in order to offset what everyone believes is an imminent liquidity-soaking rate hike by the Fed (which very well may not happen if and when Q1 GDP is revealed to have grown just about 1% after all the snow in the winter), it is only logical that gold (and close behind it, silver) was the worst performing asset in February, because the BIS boys led by Benoit Gilson have to do something to earn their money.
As for the best performing asset overall in 2015? Well, just tell Putin “spasibo.”
So without further ado, here is DB explaining and charting the best and worst performing assets of February and YTD:
|The EU is in trouble, but you have heard this sad story before.|
The Continent experienced a third straight month of declining prices in February, data showed, but the jobless rate ticked down to the lowest level since 2012.
Hilsenrath: Fed Ushering in New Era of Uncertainty on Rates (WSJ)
Is Supreme Court’s chief justice ready to take down ObamaCare? (The Hill)
Netanyahu arrives in U.S., signs of easing of tensions over Iran speech (Reuters)
Nemtsov Murder Fuels Suspicion, Fails to Spur Russia Selloff (BBG)
ECB uncomfortable with leading role in Greek funding drama (Reuters)
Iraq Military Begins Campaign to Reclaim Tikrit (WSJ)
The last time we looked at the most important tower in the world, about 4 months ago, it looked as follows:
The tower in question is the primary microwave relay into the ill-named “New York” Stock Exchange which actually is located just off MacArthur Boulevard and Route 17 in Mahwah, New Jersey, and in our opinion is the “most important tower” in the world, because without it, the financial industry, which these days means a few hundred thousands HFT algos and their math PhD creators, would grind to a halt as suddenly trading would revert back to the “caveman days” of 2007, when one actually traded not just to frontrun a whale order in some dark pool half way around the world, but actually cared about such things as “fundamentals” and “reality” (oh, and there wasn’t some $12 trillion in cental bank created liquidity supporting every asset class).
The reason we bring up said tower, is because over the past several weeks there has been some furious work by engineers hanging off said tower some 100 feet in the air, resolutely adding a particular device to the primary microwave relay tower at the NYSE.
The device in question has been highlighted:
FRANKFURT (Reuters) – European Central Bank policymakers decamp to Cyprus on Wednesday wrestling with the uncomfortable fact that they may hold the keys to Greece’s continued membership of the euro.
With key economic data either behind us (with the downward revised GDP), or ahead of us (the February payrolls on deck), and the Greek situation currently shelved if only for a few days/weeks until the IMF payment comes due and the farce begins anew, stocks are focuing on the widely telegraphed 25 bps Chinese rate cut over the weekend, which however has so far failed to inspire a broad based rally either in Asia (where the SHCOMP closed up 0.8% after first dipping in the red) or across developed markets. In fact, as of this moment futures are hugging the unchanged line as the USDJPY attempted another breakout of 120.000 but with numerous option barrier expiration stop at that level, it has since retracted all the overnight gains and is back to the Sundey lows, even as the EURUSD has seen a powerful breakout from overnight lows and is currently at the highest level since the US GDP print, following the release of the final European February PMI data, as a result of USD weakness since the European open.
Look at regional performance, Asian equities traded mostly higher as the PBoC cut its benchmark interest rate. The bank lowered its benchmark interest rate by 25bps to 5.35%, citing deflationary risk and the property market slowdown. It also lowered the 1yr deposit rate to 2.5% and lifted the ceiling on the deposit rate to 1.3x the benchmark rate. Shanghai Comp (+0.8%) and Hang Seng (+0.3%) traded in the green, despite fluctuating between losses and gains, following an initial pessimistic reaction to the central banks’ actions. Nikkei 225 (+0.15%) traded on a caution note, paring back earlier gains following yet another surge to a fresh 15yr high. Chinese HSBC Manufacturing PMI (Feb F) M/M 50.7 vs. Exp. 50.1 (Prev. 50.1); 7-month high. Official Manufacturing PMI (Feb) M/M 49.9 vs. Exp. 49. …
BRUSSELS (Reuters) – Euro zone consumer prices fell by less than expected in February while unemployment eased in January for the third month in a row, offering signs that the risks of economic stagnation and deflation in the bloc are falling.
LONDON (Reuters) – European shares clung to seven-year highs on Monday, lifted by merger activity in the telecoms sector, while Asian stocks edged up after China cut interest rates at the weekend.
WASHINGTON (Reuters) – Janet Yellen’s premium on consensus may lead to a Federal Reserve decision the chair hasn’t yet endorsed, as a near majority aligns in favor of a possible June interest rate hike.
“The Fed is out of control,” exclaims David Stockman – perhaps best known for architecting Reagan’s economic turnaround known as ‘Morning in America’ – adding that “people don’t want to hear the reality and the truth that we’re facing.” The following discussion, with Harry Dent, outlines their perspectives on the looming collapse of free market prosperity and the desctruction of American wealth as policymakers “take our economy in a direction that is dangerous, that is not sustainable, and is likely to fully undermine everything that’s been built up and created by the American people over decades and decades.” The Fed, Stockman concludes, “is a rogue institution,” and their actions have led us to “one of the scariest moments in our history… it’s a festering time-bomb and we’re not sure when it will explode.”
Key Excerpts from the detailed interview:
David Stockman: People don’t want to hear the reality and the truth that we’re facing. But I think there is an enormous appetite out in the country to get a different perspective than what you have from the media day in and day out, so I say the fed is out of control. Its balance sheet is exploded. It’s printing money like never before.
Zero interest rates for 70 months have basically destroyed the pricing function in the financial markets. I said that as a result of th …
The Outlook: Investors are obsessing over when the Federal Reserve will start raising short-term rates. Drawing less scrutiny is where rates will end up in the long run and how they’ll get there. But it’s time to start paying attention.
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