It’s Central Bank Bonanza Day: European Stocks Slide Ahead Of ECB; S&P Futs Hit Record High

One day after the Fed hiked rates by 25 bps as part of Janet Yellen’s final news conference, it is central bank bonanza day, with rate decisions coming from the rest of the world’s most important central banks, including the ECB, BOE, SNB, Norges Bank, HKMA, Turkey and others.
And while US equity futures are once again in record territory, stocks in Europe dropped amid a weaker dollar as investors awaited the outcome of the last ECB meeting of the year: the Stoxx 600 falls 0.4% as market shows signs of caution before the Bank of England and the European Central Bank are due to make monetary policy decisions as technology, industrial goods and chemicals among biggest sector decliners, while miners outperform, heading for a 5th consecutive day of gains. ‘The Federal Reserve raised interest rates last night, but they weren’t overly hawkish in their outlook. This has led to traders being subdued this morning,’ CMC Markets analyst David Madden writes in note.
The stronger euro pressured exporters on Thursday although overnight the dollar halted a decline sparked by the Fed’s unchanged outlook for rate increases in 2018, suggesting “Yellen Isn’t Buying Trump’s Tax Cut Talk of an Economic Miracle.”
That said, it has been a very busy European session due to large amount of economic data and central bank meetings, with the NOK spiking higher after the Norges Bank lifted its rate path, while the EURCHF jumped to session highs after SNB comments on CHF depreciation over last few months. The AUD holds strong overnight performance after a monster jobs report which will almost certainly be confirmed to be a statistical error in the coming weeks, while the Turkish Lira plummets as the central bank delivers less tightening than expected. Meanwhile, the USD attempts a slow grind away from post-FOMC lows.

This post was published at Zero Hedge on Dec 14, 2017.

Pound Slides After BOE Holds Rates: Warns Q4 Economy “Slightly Softer”, Sees “Gradual And Limited” Rate Hikes

As previewed moments ago, the BOE decision was rather unexciting, and after its November rate hike – the first in a decade – which many speculated could be a “one and done”, the Bank of England unanimously kept rates unchanged at 0.50% as expected. The lack of dissenters meant this was the first time the nine policy makers have been in agreement since February. The committee also left the BOE’s QE unchanged.
MPC holds #BankRate at 0.50%, maintains government bond purchases at 435bn and corporate bond purchases at 10bn.
— Bank of England (@bankofengland) December 14, 2017

This post was published at Zero Hedge on Dec 14, 2017.

Mark Carney Forced To Explain Surge In UK Inflation To Highest In Almost 6 Years

The market expected Mark Carney to avoid it but it was just not meant to be.
The BoE Governor will suffer the ignominy of a bizarre tradition of having to write a letter to the Chancellor of the Exchequer explaining why UK inflation is more than 1.0% above the target of 2.0%. The market had expected the UK CPI to rise by a modest 0.2% month-on-month, taking the year-on-year rate up to 3.0%. Instead the month-on-month rate hit 0.3% pushing the annual rate to 3.1%, its highest rate since March 2012.
As Bloomberg writes, “U. K. inflation unexpectedly accelerated to the fastest in more than 5 1/2 years in November, forcing Bank of England Governor Mark Carney to explain why price growth is so far above target. Consumer prices rose 3.1 percent from a year earlier, driven by the cost of air fares and computer games, the Office for National Statistics said on Tuesday. That’s up from 3 percent in October and the highest since March 2012.”

This post was published at Zero Hedge on Dec 12, 2017.

Chinese Stock Rout Resumes As Top Fund Sees “High Probability” Of Bond Carnage

In early November, we discussed how commentators were disturbed by the sell-off in Chinese government bonds after the Party Congress, which saw yields rise to 4.0%. The anomaly was that yields in less-liquid, unsecured Chinese corporate bonds had barely moved. Some sleuthing on the part of the Wall Street Journal discovered that the most likely explanation was that redemptions in China’s shadow banking sector, especially in the infamous $4 trillion Wealth Management Products (WMP), meant that cash needed to be raised…quickly. Highly liquid government bonds were the easiest option. Furthermore, retaining the higher-yielding corporate bonds was handy in meeting the guaranteed returns in the WMP Ponzi schemes.
The relative stability in corporate bond yields was short-lived, with the Chinese bond sell-off spreading to the corporate sector as November progressed. Besides the post-Congress focus on deleveraging, the mainstream explanation was that investors were differentiating between good and bad credits ahead of more than $1 trillion of local bonds maturing in 2018-19. The spin was positive as it would lead to capital being channeled more productively.
Needless to say, this was not how we viewed it. From our perspective, it looked like the emergence of cascading sell-offs within Chinese financial markets which have been abused by excessive leverage and Ponzi characteristics. Recent plunges in Chinese equities have strengthened our conviction. Indeed, as the new trading week opened, equities were hit again, as we pointed out last night and as Bloomberg observes this morning:
After taking a breather in the wake of a battering Thursday, Chinese shares resumed their decline Monday, with some previously high-flying consumer and technology companies among the hardest hit. The CSI 300 Index of large-cap stocks was down 1.3 percent as of the mid-day trading break, with ZTE Corp. and BOE Technology Group Co. both falling more than 6 percent…’Institutional investors are choosing to cash in toward year-end as valuations are near historic highs and market sentiment deteriorated after official media targeted Moutai,’ said Shen Zhengyang, Shanghai-based analyst at Northeast Securities Co. He said the market ‘lacks steam’ for further gains.

This post was published at Zero Hedge on Nov 27, 2017.

Bank Of England Hikes Rates By 25bps In 7-2 Vote; First Increase In A Decade; Pound Plunges

Over ten years since the last rate hike by the Bank of England in July 2007 (when incidentally, cable was trading above $2.00), and following years of market expectations of an imminent rate hike that failed to materialize…
…. moments ago the BOE – which had telegraphed the move extensively in recent months despite some dovish misgivings – finally pulled the trigger, and raised rates by 25bps to 0.5% in order to curb the effect of high inflation brought about by the post-Brexit plunge in the pound, squeezing local households and pressuring the UK economy. However, while cable initially spiked higher on the news, it subsequently slumped on the news that the vote was not a unanimous 9-0 decision as some had expected, as would telegraph a normal rate hike cycle, and instead had a decidedly dovish tilt with a far more contested 7-2 vote, with Cunliffe and Ramsden dissenting based on insufficient evidence that domestic costs, particularly wage growth, would pick up in line with central projections.

This post was published at Zero Hedge on Nov 2, 2017.

Market Talk- October 31, 2017

A slow but steady day in Asian equity markets, but happy in the knowledge that the BOJ left almost everything unchanged. The Nikkei closed almost unchanged but has set an impressive two month rally. At above 22k the index closes at a 21 year high, but after the weak opening it took all day to recover unchanged. The Yen was a little weaker (0.5%) as it challenges the 114 handle again. The Australian ASX did open better but drifted throughout the day eventually closing on its low. However, irrespective of todays price action it has been a constructive month for the All Ords with a gain of around 3%. Shanghai managed to shake-off the PMI miss (51.6 against market expectations of 52), with Services also declining. In Hong Kong the Hang Seng we closed down -0.3% with bank stocks weighing on the market.
Although we finished the month on a positive note, volumes were low. This usually is the case when a large index is closed and with Germany on a national holiday the absence of the DAX was noticeable. Spain’s IBEX helped sentiment though with a daily gain of +0.7%. The market is valuing ‘no news’ as positive these days, so with the demand for yield ever present any quiet day is good for low grade paper. This is present when comparing global credits to the states where it is not uncommon to find BBB credits trading even yield with US treasuries. The CAC managed a small +0.2% gain whilst the largest bank (BNP Paribas) recorded as the worst performing European bank stock today (-2.7%). UK’s FTSE managed a small positive for the day but an +0.5% in the currency helped international investors as traders continue to price in a BOE move on Thursday. Talk is that BREXIT discussions may be progressing better than many had expected but we have yet to hear details.

This post was published at Armstrong Economics on Oct 31, 2017.

BoE Expected To Vote 6-3 For Rate Increase And Signal Markets Underpricing Future Hikes

The last time the Bank of England raised rates was July 2007, when rates increased to 5.75%. Credit markets began to dislocate a month later (when LIBOR diverged from Fed Funds), equity markets peaked three months after the increase andthings eventually got much worse.
So, the track record is not auspicious, but the alleged global macro narrative this time is one of synchronised global growth, notwithstanding Catalonia, North Korea and embryonic concerns about Chinese deleveraging. On the domestic front, UK inflation is a bit too warm, growth a bit too tepid and Brexit a bit too uncertain.
Nonetheless, the BoE is expected to vote 6-3 in favour of a rate hike from 0.25% to 0.50% on Thursday, as Bloomberg reports, not everyone at the Bank of England will be on board with raising interest rates.
While Nov. 2 may see the U. K.’s first rate increase in more than a decade, economists surveyed by Bloomberg say three out of nine officials on the Monetary Policy Committee will vote against the move. That’s based on the median estimate from 24 responses. Any divide within the BOE panel reflects the conflicting signals from the economy, which is seeing both a currency-driven inflation surge and weaker expansion. While for some officials, the economy may still be too fragile to endure a rate increase, Governor Mark Carney and others see Brexit reducing potential output, making the U. K. more vulnerable to overheating.

This post was published at Zero Hedge on Oct 31, 2017.

UK Retail Employment Plunges Most Since 2008 As Retail Sales Crash

Yesterday we noted the surge in cable following the stronger-than-expected Q3 GDP print of 0.4% Q/Q, above the 0.3% estimate. Afterwards, the market was calculating an 87% chance that the BoE would hike next week. Brown Brothers commented that:
The case against a hike is that inflation appears poised to peak shortly, the economy is softening, and real wages are falling. This may already be squeezing households, where an increase in the base rate is quickly passed through to households.
However, two reports from the UK retail sector might encourage some nervous MPC members to stand pat.
Bloomberg reports, U. K. retail sales are falling at the fastest pace since the depths of the recession in 2009 and worries about the housing market could exacerbate the weakness in consumer spending seen this year. The Confederation of British Industry said its measure of sales plunged to minus 36 in October – the lowest since March 2009 — from a positive 42 in September. Sales for the time of the year were slightly below the usual seasonal rates, it said.

This post was published at Zero Hedge on Oct 27, 2017.

Cable Soars After Strong UK GDP, Boosting Rate Hike Odds

It all started at 9:30am local time, when the UK reported a stronger than expected Q3 GDP print of 0.4% Q/Q, above the Exp. 0.3%, and 1.5% Y/Y, also above the Exp. 1.4%. Heading into the report there was much anticipation, due to chatter that a miss would drastically diminish the chance for a 2017 rate hike from the BOE. And while the initial response to the beat was rather muted, cable started gathering momentum after the report, with cable rising as high as 1.326, after nearly sliding below 1.31 earlier in the session.
And while the strong data will likely reassure those at the BoE in favour of hiking, it was not strong enough to convince those who are still on the fence. Still, given the split, most sellside desks believe that a hike is now more or less guaranteed, especially with Brexit noise dying down for the time being.

This post was published at Zero Hedge on Oct 25, 2017.

Ray Dalio Is Shorting The Entire EU

A point BOE Governor Mark Carney made recently may be the biggest cog in the European Union’s wheel (or is it second biggest? Read on). That is, derivatives clearing. It’s one of the few areas where Brussels stands to lose much more than London, but it’s a big one. And Carney puts a giant question mark behind the EU’s preparedness.
Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks
Carney explained why Europe’s financial sector is more at risk than the UK from a ‘hard’ or ‘no-deal’ Brexit. [..] When asked does the European Council ‘get it’ in terms of potential shocks to financial stability, Carney diplomatically commented that ‘a learning process is underway.’ Having sounded alarm bells about clearing in his last Mansion House speech, he noted ‘These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.’
Calling into question the continuity of tens of thousands of derivative contracts , he stated that it was ‘pretty clear they will no longer be valid’, that this ‘could only be solved by both sides’ and has been ‘underappreciated’ by Europe . Carney had a snipe at Europe for its lack of preparation ‘We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.’
In Carneys view ‘It’s in the interest of the EU 27 to have a transition agreement. Also, in my judgement given the scale of the issues as they affect the EU 27, that there will ultimately be a transition agreement. There is a very limited amount of time between now and the end of March 2019 to transition large, complex institutions and activities…

This post was published at Zero Hedge on Oct 19, 2017.

Carney Reveals Europe’s Potential Achilles Heel in Brexit Talks

This morning, BoE Governor Mark Carney discussed the risks of a hard Brexit during his testimony to the UK Parliamentary Treasury Committee. There was renewed weakness in Sterling during his testimony.
Ironically, given the fall in Sterling, Carney explained why Europe’s financial sector is more at risk than the UK from a ‘hard’ or ‘no-deal’ Brexit. We wonder whether Juncker and Barnier appreciate the threat that a ‘no-deal’ Brexit poses for the EU’s already fragile financial system?
When asked does the European Council ‘get it’ in terms of potential shocks to financial stability, Carney diplomatically commented that ‘a learning process is underway.’ Having sounded alarm bells about clearing in his last Mansion House speech, he noted ‘These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.’
Calling into question the continuity of tens of thousands of derivative contracts, he stated that it was ‘pretty clear they will no longer be valid’, that this ‘could only be solved by both sides’ and has been ‘underappreciated’ by Europe. Moving on to the possibility that there might not be a transition period, Carney had a snipe at Europe for its lack of preparation ‘We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.’

This post was published at Zero Hedge on Oct 18, 2017.

The Best And Worst Performing Assets In September, Q3 And 2017 YTD

While September and Q3 were the latest solid month for US risk assets, which ended the month and quarter at all time highs, across the globe returns were relatively more mixed for the sample of assets tracked by Deutsche Bank. That said, a large number of assets (21 of 39 in local currency terms) finished with a total return between -1% and +1% which in part reflects another month of incredibly low volatility with the VIX in particular spending much of it trading between 9.5 and 11.0. In the end, excluding currencies 19 out of 39 assets finished the month with a positive total return in local currency and USD hedged terms.
As Deutsche Bank’s Jim Reid reports this morning, in terms of the movers and shakers, commodities dominated the top of the German bank’s leaderboard with Wheat (+9%), WTI (+9%) and Brent (+8%) all finishing with a high single digit return. It’s worth noting however that this does follow heavy falls for the price of Wheat and WTI in August. Equities generally had a strong month, particularly in Europe where a slightly weaker euro (-1%) aided local currency returns. The DAX (+6%), FTSE MIB (+5%), Stoxx 600 (+4%), Portugal General (+4%) and IBEX (+1%) all finished firmer – the latter underperforming however reflecting elevated tension around the Catalan referendum. Returns in USD terms were 0% to +6%. It’s worth also noting the return for European Banks (+5% local, +4% USD) which got a boost from the slightly higher rate environment. There were two standout underperformers in equity markets however. The first was the Greek Athex which tumbled -8% in local terms although still remains up an impressive +19% YTD. The other was the FTSE 100 which fell -1% under the weight of a strong month for Sterling (+4%) following the BoE signalling an imminent rate hike as well as some progress around Brexit talks. Indeed in USD terms the FTSE 100 was up +3%.

This post was published at Zero Hedge on Oct 2, 2017.

Albert Edwards: “Citizen Rage” Will Soon Be Directed At “Schizophrenic” Central Banks

Perhaps having grown tired of fighting windmills, it was several weeks since Albert Edwards’ latest rant against central banks. However, we were confident that recent developments out of the Fed and BOE were sure to stir the bearish strategist out of hibernation, and he did not disappoint, lashing out this morning with his latest scathing critique of “monetary schizophrenia”, slamming all central banks but the Fed and Bank of England most of all, who are again “asleep at the wheel, building a most precarious pyramid of prosperity upon the shifting sands of rampant credit growth and illusory housing wealth.”
Follows pure anger from the SocGen strategist:
These of all the major central banks were the most culpable in their incompetence and most prepared with disingenuous excuses. And 10 years on, not much has changed. The Fed and BoE are once again presiding over a credit bubble, with the BoE in particular suffering a painful episode of cognitive dissonance in an effort to shift the blame elsewhere. The credit bubble is everyone’s fault but theirs.
First, some recent context with this handy central bank holdings chart courtesy of Deutsche Bank’s Jim Reid which alone is sufficient to make one’s blood boil.

This post was published at Zero Hedge on Sep 21, 2017.

World Stock Markets Weaker; U.S. Inflation Data, BOE Meeting In Focus

Kitco News) – Global stock markets were mostly weaker overnight. Some weak economic data coming out of China dented investor risk appetite. Industrial production, fixed-asset investment and retail sales were all lower than expected in August. U. S. stock indexes are pointed toward slightly lower openings when the New York day session begins.
Gold prices are near steady in pre-U. S. day-session trading.

This post was published at Wall Street Examiner on September 14, 2017.

Goldman “Unexpectedly” Exempt From Venezuela Bond Trading Ban

When the White House announced on Friday that Trump had signed an executive order deepening the sanctions on Venezuela, and confirming the previously rumored trading ban in Venezuelan debt that earlier in the week had sent VENZ/PDVSA bonds tumbling, we made what we thought at the time was a sarcastic comment that in light of the recent scandal involving Goldman’s purchase of Venezuela Hunger Bonds, that Lloyd Blankfein’s hedge fund, which now controls the presidency and next year will also take over the Fed courtesy of Gary Cohn, would be exempt from the trading ban:
So all bonds owned by Goldman are exempt from the Venezuela sanctions until Goldman can sell them?
— zerohedge (@zerohedge) August 25, 2017

And, as it so often happens in a world controlled by Goldman (as a reminder, in 2018 the world’s three most important central banks, the Fed, the ECB and the BOE will be run by former Goldman employees: Gary Cohn, Mario Draghi and Mark Carney), sarcasm has a way of chronically turning into truth, and as Bloomberg confirmed overnight, one of Venezuela’s largest bondholders is “breathing a sigh of relief.”
That would be Goldman Sachs Asset Management, which infamously bought $2.8 billion of notes issued by state oil company PDVSA in May, and has since faced sharp criticism for a deal that appeared to supply fresh funds to President Nicolas Maduro. Confirming our initial “sarcastic” reaction, while observers thought the Goldman bonds would be a prime target for new penalties, they were exempt from the order. In fact, the only bonds covered by the trading ban are notes due in 2036 that appear to never have been sold outside Caracas.

This post was published at Zero Hedge on Aug 26, 2017.

Albert Edwards: “The Last Time This Happened Was In January 2008”

Two days ago, we were the first to point out that in a striking case of data revisionism, the Bureau of Economic Analysis, in an attempt to retroactively boost GDP, revised historical personal incomes lower, while adjusting its estimates of personal spending much higher, resulting in a sharp decline in personal savings, which as a result, was slashed from 5.5% according to the pre-revised data, to just 3.8%, in one excel calculation wiping out 30% of America’s “savings”, and cutting them by a quarter trillion dollars in the process, from $791 billion to $546 billion, a level last seen just before the last US recession.
Today, SocGen’s grouchy bear Albert Edwards, commented on this drastic revision which disclosed that contrary to previous conventional wisdom that US consumers had been hunkering down in recent years and saving up for a rainy day, the surge in spending in late 2016 may have been the only catalyst that prevented the US from collapsing into outright contraction. Edwards also reminds us that such a dramatic savings slump last occurred in 2007, just before all hell broke loose.
As Edwards writes, “very recent data confirms slumping household saving ratios in both the US and UK. This was last seen in 2007, just before the bursting debt bubble blew the global economy and financial system to smithereens. The Fed and BoE should surely hang their heads in shame having presided over yet another impending disaster. Why will politicians and the people tolerate this incompetence? Indeed they won’t.”

This post was published at Zero Hedge on Aug 3, 2017.

BOE Preview: Whispers Of 25bps

All eyes are now on the midday announcement from the BoE, where a 25bp rate rise is only expected by a very few, but more anticipating signals that a move is forthcoming later this year.
The vote split will tell is whether Haldane – or anyone else – has moved to the hawkish camp, but with Forbes having left the commitee, a 6-2 split is also likely. Comments from Messrs McCafferty and Saunders suggest there is little or no chance that they have changed their stance from the previous meeting.
Looking at the PMIs, the data is relatively healthy at the present time, with both manufacturing and services up on expectations as well as June levels, but for consideration at the MPC will be the growth rate, which has slipped from 2.0% in Q1 to 1.7% in Q2.
Wage growth is also a concern, but although earnings were down on May levels, Jun was not as soft as expected.

This post was published at Zero Hedge on Aug 3, 2017.

Pound Plunges After BOE Votes 6-2 To Keep Rates Record Low, Cuts Growth Forecast

MPC holds #BankRate at 0.25%, maintains government bond purchases at 435bn and corporate bond purchases at 10bn.
— Bank of England (@bankofengland) August 3, 2017

The whispers about a potential rate hike by the recently hawkish BOE ended up being wrong, when moments ago the Bank of England announced that in a 6-2 decision it kept rates unchanged at 0.25%, largely as expected. Saunders and McCafferty dissented in favor of an immediate interest-rate increase, with Haldane refusing to join the dissenters.
In separate unanimous decisions, the central bank also kept its bond purchase programs unchanged at GBP10BN and GBP435BN for corporate and government bonds respectively.
The pound tumbled on the news…

This post was published at Zero Hedge on Aug 3, 2017.

“You Know What You Did”: Scaramucci Punked By Email Spoofer Pretending To Be Priebus

The first two times infamous email spoofer @SINON_REBORN struck, the UK was scandalized when first Barclays CEO Jes Staley, then the head of the BOE, Mark Carney himself, were duped into lengthy email conversations with the “prankster” as the FT reported at the time. Staley, thinking he was being emailed by Barclays chair John McFarlane, offered his effusive praise to his respondent, saying among other things that he had “all the fearlessness of Clapton.” Carney, in turn, responded to emails from the imposter pretending to be Anthony Habgood, the chairman of the court of the BoE.
Then, in June, the spoofer extended his winning streak by also punking Goldman’s Lloyd Blankfein and Citi’s Michael Corbat into believing he was someone else.
Now, the same prankster, a 38-year-old web designer from Manchester according to the FT, has struck again, this time fooling several highly placed White House officials on several occasions, most remarkably Anthony Scaramucci, into thinking he was someone else.
As CNN reports, the exchange between the prankster and the Mooch may have played a role in the tensions between the now former White House Communications Director and the since-fired White House Chief of Staff, Reince Priebus, who replacement Gen. Kelly fired Scaramucci.

This post was published at Zero Hedge on Aug 1, 2017.