Tag: news

To think it was just over two weeks ago, when the Russell was in a bear market, and the S&P was on the verge of not only closing red for the year, but entering its first correction in years. Then James Bullard soothed all the selling algos that in a worse case scenario the Fed will rush to bail all the BTFDers out yet again, and the rest is history.

What ensued was an October, which as DB’s Jim Reid notes,  proved to a wild ride for markets with mixed performances across various asset classes. Indeed on volatility alone October actually saw the widest intra-month range for the S&P 500 since October 2011. The S&P 500 finished the month at an all-time new high of 2018 after having dipped to an intraday low of 1821 around mid-month giving rise to high-low range of almost 198pts. Whilst Stoxx600 had a negative performance in August the intra-month range of 41pts was the widest since August 2011. The ‘flash rally’ in Treasuries around mid-month also produced the most volatile month for the asset class since the taper-tantrum last year. The 10yr note experienced a intra-month range of 64bps which was just shy of the 67bps range we saw in June 2013.

Some other observations:

Volatility aside October was pretty much a month of two halves with the turn arriving at around the mid-way mark. Generally both equities and fixed income did well with the latter retracing some of the gains as the bid for safety assets moderated. Soft commodities (Corn and Wheat) aside, equities took up half of the top 10 best performers in October. The Russian MICEX, the Hang Seng, the S&P 500, Shanghai Composite and the Nikkei were up +5.7%, +4.8%, +2.4%, +2.4% and +1.5%, respectively on a total return basis. The Hang Seng reversed most of the protest-led losses in September whilst the Nikkei received a treat on the very last day of October following the BoJ’s surprise move to add more stimulus. On a total return basis US HY credit (+1.5%) was one of the better performers in October although it did also benefit from a solid performance in rates. Treasuries were up as much as +2.3% in mid-October before giving back some of those gains to close 1.1% up on the month. Staying in fixed income core rates markets were also stronger in October with Bunds and Gilts adding +0.6% and +1.4%, respectively. The European peripheral complex was weaker though. Italian bonds and equities were down -0.4% and -5.3% in October. Spanish and Portuguese equity markets were also down -2.8% and -8.3%, respectively. But the worst performer in October goes to Greek equities with the Athex index losing nearly 14% after having lost nearly 9% in September. In fact Greek equities are now the worst performing YTD asset class in our sample, now down 21% in local currency terms and 28% in USD terms. Elsewhere the EM complex also had a good October with the MSCI EM equities index and EM bonds up 1.2% and 1.6% respectively.

 

Before we wrap up, October was also the month where Oil officially dipped into bear market territory after a monthly decline of 12% in WTI and 10% in Brent. The Dollar strength probably didn’t help although in reality the decline was also driven by concerns around aggregate demand. The Dollar gained 1.1% against major currency pairs to mark its fourth consecutive monthly gain whilst the JPY has depreciated to a 2007 low. Our usual performance table and charts included in the PDF. It has all the YTD performance charts and data included.

And here are the charts showing the best and worst performing assets for October…

 

and for YTD, both in local currency….

 

and in USD.

Note that while some of the best performing YTD assets in local currencies, such as BTPs and Spanish bonds roared in EUR terms, they are increasingly subdued when redenominated in USD, suggesting that the S&P’s gain is nothing more than a voluntary submission to being beggared by its neighbors. It remains to be seen just how much longer the US can sustain being the world’s whipping currency, and surging day after day.

via Zero Hedge http://ift.tt/1DStn8C Tyler Durden

via Zero Hedge http://ift.tt/1DStlxy williambanzai7

The markets erupted last week to new highs on the Bank of Japan’s announcement that it would increase its massive QE program.

 

The Yen collapsed on the news and is now on the cusp of breaking a multi-decade support line:

 

 

While US stocks eked out a new high:

 

 

This move is very reminiscent of the 2007 top. At that time we had a top, followed by a quick correction and then a final blow off to eke out new record highs:

 

 

It is not merely the market that is mirroring the 2007 top.

 

1.     Corporate debt is back to 2007 PEAK levels.

2.     Stock buybacks are back to 2007 PEAK levels.

3.     Investor bullishness is back to 2007 PEAK levels.

4.     Margin debt (money borrowed to buy stocks) is at 2007 PEAK levels.

5.     The leveraged loan market is flashing major warnings.

6.     Corporate insiders are dumping shares at a pace not seen since the TECH BUBBLE TOP

7.     Numerous investment legends have warned of a coming crash.

8.     Investor complacency is at a record LOW.

9.     The Fed has confirmed QE is ending this week, so the juice is cut off for now.

 

The Fed has succeeded in recreating the same environment that existed in 2007. Once again we have rampant risk taking, excessive leverage, and a stock market bubble.

 

The only difference is that WHEN (it’s no longer a question of IF), stocks collapse this time around, the Fed has already spent just about ALL of its ammunition.

 

·      Interest rates are at ZERO, so the Fed cannot cut rates.

·      The Fed has spent nearly $4 trillion in QE, so announcing a new QE program won’t accomplish much.

 

This leaves other minor policy changes, verbal interventions, and of course, the nuclear option of outright buying stocks. The Fed has been effectively doing this via QE for four years by giving money to Wall Street to buy stocks, but the Fed could always opt to do what the Bank of Japan does and simply buy stocks itself.

 

However, it’s not clear what any of this would accomplish. Stocks might move higher, but the accompanying economic woes wouldn’t go over well, especially given that the Fed is already in the political hot seat due to its total lack of oversight and its cozy relationship with the Big Banks.

 

Given that the Bank of Japan’s latest increase in QE was in fact made by a VERY divided board (the vote was 5-4 in favor of the increase), we can assume that the Fed would face similar pushback both internally and externally (particularly if the GOP takes the Senate).

 

In simple terms… we’re back in 2007, but the Fed will have very real limitations to what it can do when this bubble pops. And it will pop in the not so distant future.

 

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US manufacturing both declined (PMI) and rose (ISM) in October as the divergence  between the two soft-survey-based data streams is as ridiculous as it was in the second half of last year. ISM printed a cycle high 59.0 (highest since March 2011) smashing the 56.1 expectations (the biggest beat since July 2013). While the headline print was exuberant, New orders fell, as did new export orders. Construction spending fell for the 2nd month in a row, dropping 0.4% against expectations of a 0.7% rise.

 

Doesn’t seem like the US decoupling is taking hold domestically… 4th miss in a row for Construction spending and 2nd monthly drop.

• *CONSTRUCTION SPENDING IN U.S. DECLINES TO WEAKEST SINCE MARCH
• *U.S. SEPT. PUBLIC CONSTRUCTION SPENDING FALLS 1.3% FROM AUGUST
• *U.S. SEPT. PRIVATE NON-RESIDENTIAL CONSTRUCTION FALLS 0.6%

ISM beat by the most since July 2013 to cycle highs…

 

Makes sense…

 

It appears the ISM needs a better seasonal adjustment.

And speaking of seaosnal adjustments, because a “soft-data” survey apparently needs to be seasonally adjusted, here is what the all importnat New Orders ISM would look like with and without seasonal adjustments:

 

Yup: the unadjusted New Orders print is back at February 2014 levels.

Clearly what US manufacturing needs is yet another, a third, “impartial” survey of US manufacturing to serve as a tiebreaker to farcical states, such as now, when Markit says worse, ISM says better, and the “self-reported”, cherrypicked, seasonally-adjusted respondents say the following:

• “Holiday orders are exceeding seasonal forecasts. Customers are demanding additional quantities above prior orders. Fuel costs and other positive signals appear to be creating demand above normal.” (Food, Beverage & Tobacco Products)
• “Weakness in commodity prices very positive on our business.” (Fabricated Metal Products)
• “We continue to see strong demand across multiple sectors.” (Transportation Equipment)
• “Business steady and strong.” (Furniture & Related Products)
• “Another strong month in terms of business growth.” (Computer & Electronic Products)
• “Most business segments are seeing an upward trend in orders — mostly from existing customers, but also some new customers. Transportation continues to be a major issue.” (Chemical Products)
• “Conditions are still basically flat.” (Printing & Related Support Activities)
• “Production is oversupplying demand, and prices have softened.” (Wood Products)
• “Outer body material changes in the auto industry means new equipment and manufacturing growth.” (Machinery)
• “Business conditions are good; sales and production volumes are generally increasing.” (Miscellaneous Manufacturing)

via Zero Hedge http://ift.tt/1wYEBrN Tyler Durden

Moments ago, GM was pleased to report that its dealers delivered 226,819 vehicles in the United States in October leading to “the company’s best October sales in seven years.” GM added that Chevrolet sales were up year over year on the strength of the Silverado, Cruze, Traverse and Equinox, and “Buick had its best October in more than a decade.” Alas, Cadillac did not, October sales tumbled -8.0%, and are down -4.6% on a YTD Y/Y basis. Bottom line: total GM sales increased a tiny 0.2%, well below the 3.1% expected.

But it could have been much worse if GM had not resorted to its favorite sales “boosting” gimmick: channel stuffing. Indeed, as GM reported, in October, total units at dealer lots, rose to 792,489, or a whopping 94 days supply, up from 753, 928 (81 days) in September, and up a whopping 8.9% from the 728K in October of last year, when, again, sales were only 0.2% lower. This was the biggest one month jump in “dealer stuffed” vehicles since November of 2013.

Expect to see much more channel stuffing into year end, as the subprime-funded purchasing tide crashes, now that regulators and authorities are aggressively looking into a surge in subprime loans to fund auto purchases.

via Zero Hedge http://ift.tt/1tzz5Lu Tyler Durden

But, but, but the US is the cleanest dirty short that has decoupled from the rest of the world and is the engine of global growth… right? Well with residential investment having plunged, and now manufacturing PMI slumping, we are going to need a better meme. US Manufacturing PMI printed 55.9 final for October, missing expectations fo 56.2 (for 5th month in a row), sliding to its lowest since July. Markit gingerly admits, “the latest figures indicate that the recovery has lost some intensity at the start of the fourth quarter.”  

 

 

Markit additionally notes,

“Latest data highlighted a sharp moderation in input cost inflation, which some firms linked to lower commodity prices on world markets. Meanwhile, factory gate charges rose at the slowest rate for four months in October.

 

Output growth moderated to a seven-month low in October, but was still stronger than the post-crisis trend. Weaker new business gains also contributed to the slowest increase in backlogs of work across the manufacturing sector since January.”

*  *  *

So, in summary, the US is decoupling from the rest of the world and
US GDP is decoupling from both domestic housing and manufacturing?

via Zero Hedge http://ift.tt/1tzz5Ln Tyler Durden