Author: admin

Janet Yellen will be pleased, or maybe not. Producer Price Inflation printed hotter than expected across all its various incarnations (good news, no deflation; bad news, no deflation excuse for The Fed). Ex Food-and-Energy prices rose 1.8% YoY (4-month highs), considerably more than the 1.5% expectations and surged 0.4% MoM – the most in 16 months. PPI Final Demand rose 1.5% YoY (1.3% exp).

The rise in PPI appears driven by Food prices which are up 1.0% (the most since April), car prices (up 1.0%) and pharmaceuticals, but mostly thanks to a new calculation change because as the BLS reports, “In October, a 26.1-percent jump in margins for fuels and lubricants retailing accounted for nearly 40 percent of the increase in the index for final demand services.”  In other words, of the 0.5% jump in PPI services, 40% was due to a new calculation for in margins for fuels and lubricants retailing.

Away from calculation-fudged services, the story was much different: prices for final demand goods moved down 0.4 percent, the worst monthly tumble in over a year.

So on one hand running hot.

 

Except for actual goods, which were dragged down by a whopping 3.0% plunge in energy prices, mostly thanks to gasoline.

The breakdown:

Some more details on what caused the move:

• Final demand services: The index for final demand services moved up 0.5 percent in October, the largest increase since a 0.5-percent rise in July 2013. The October advance can be traced to a 1.5-percent increase in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing inched up 0.1 percent. Conversely, the index for final demand transportation and warehousing services edged down 0.1 percent.
• Product detail: In October, a 26.1-percent jump in margins for fuels and lubricants retailing accounted for nearly 40 percent of the increase in the index for final demand services. The indexes for machinery, equipment, parts, and supplies wholesaling; food and alcohol retailing; food and alcohol wholesaling; inpatient care; and traveler accommodation services also moved higher. In contrast, prices for airline passenger services declined 0.7 percent. The indexes for loan services (partial) and for chemicals and allied products wholesaling also decreased
• Final demand goods: The index for final demand goods moved down 0.4 percent in October, the fourth consecutive decrease. The October decline was led by prices for final demand energy, which fell 3.0 percent. The index for final demand goods less foods and energy edged down 0.1 percent. Conversely, prices for final demand foods moved up 1.0 percent.
• Product detail: Over 80 percent of the October decline in prices for final demand goods can be attributed to the index for gasoline, which dropped 5.8 percent. Prices for liquefied petroleum gas, prepared animal feeds, home heating oil, diesel fuel, and ethanol also moved lower. In contrast, the index for meats increased 5.3 percent. Prices for electric power, pharmaceutical preparations, and passenger cars also advanced.
• The index for finished consumer foods rose 1.4 percent, and prices for finished goods less foods and energy edged up 0.1 percent.

The best news: prices of alcoholic beverages dropped both from September (-0.4%), and a year ago (-0.3%).

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

Authored by RCube Global Asset Management, orginally posted at Marconomy blog,

"One thorn of experience is worth a whole wilderness of warning." – James Russell Lowell, American poet.

Please find below a great guest post from our good friends at Rcube Global Asset Management. In this post our friends go through the growing divergence in the US between credit and equities:

Major equity / Credit divergences should always be taken very seriously.

They were among the best forward looking indicators at almost every major turning point for equities over the last 20 years.

"History is a vast early warning system." – Norman Cousins, American author

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

A few weeks after VIX, aka market implied vol, soared from the mid teens to 30 following the Trasury flash crash and the subsequent near correction in the market before the much publicized James Bullard stick save of the “wealth effect”, VIX has since tumbled and at last check was once again trading in the 13/14 range, above the recent all time lows hit over the summer, even as the market continues to levitate on zero volume to ever higher record highs. Yet something is off: as those who have been following the S&P500 in the past 6 days, where the S&P closed at the following prints; 2038, 2039, 2038, 2039, 2039, 2041, this is the narrowest 6 day market range in well… ever.

So what does this mean for that other volatility, actual realized? As Newedge’s Brad Wishak points out, “30 days ago 5 day realized was printing 2yr highs (28%) vs 1% y’day.” He also notes that the only lower realized vol print in the past decade was in September 2005.

His conclusion: “hallmark qualities of a healthy market indeed.“

He is being sarcastic.

via Zero Hedge http://ift.tt/14Ef113 Tyler Durden

• Japan Prime Minister Shinzo Abe Calls Snap Election (WSJ) – as repeatedly priced in…
• Flash Boys Raising Volatility in Wild New Treasury Market (BBG)
• Not Greece again: Greek Bailout Review Stalls as Troika Demands Final Steps (BBG)
• Iran uses China bank to transfer funds to Quds-linked companies (Reuters)
• Porn Mags With Free Madrid Theater Tickets in Tax Protest (BBG)
• Hong Kong, China stocks ease on profit-taking after stock connect launch (Reuters) – Hang Seng down 500 points in past 2 days
• Halliburton Mega-Deal Sealed by CEOs Over Coke and Coffee (BBG)
• Wall Street to Reap $316 Million From Day of Mega Deals (BBG)
• Mass murderer Charles Manson gets marriage license, state says (Reuters)
• RBA’s Stevens Says Economy Needs Low Rates for Some Time Yet (BBG)
• Small Towns Go to Bat for Wall Street Banks (WSJ)
• German Investor Confidence Rebounds as Recession Averted (BBG)
• NATO leader sees ‘serious military buildup’ in Ukraine, urges Russia to pull back troops (Reuters)
• Youngest Oil Tycoon Finds Fortune After Washout as Trader (BBG)
• U.K. Annual Inflation Accelerates in October, Remains Below BOE Target (WSJ)

 

Overnight Media Digest

WSJ

* The Obama administration is undertaking a review of how it handles cases of U.S. citizens held captive by extremists abroad, according to a letter from a top Pentagon official made public Monday. (http://on.wsj.com/1uokSjl)

* Hong Kong officials began clearing the fringe of the main location of a two-month-long pro-democracy demonstration, in the start of the city’s effort to dislodge the encampments and ease the political standoff. (http://on.wsj.com/11fbm86)

* A Federal Reserve plan that could stop big banks from owning oil pipelines, metals warehouses and other physical-commodity assets is sounding alarm bells hundreds of miles from Wall Street. (http://on.wsj.com/1t6IpSe)

* The federal government’s safety-net program for private pensions is running a near $62 billion long-term deficit, largely due to long-standing problems in a type of pension plan that is common in transportation, construction and some other industries. The problems are likely to bankrupt the federal safety-net program for so-called multiemployer pension plans within the next decade. (http://on.wsj.com/1uI8R9M)

* Actavis PLC agreed to pay $66 billion in cash and stock for Allergan Inc in a deal that appears to have prevented a hostile takeover of the Botox maker by Valeant Pharmaceuticals International Inc. (http://on.wsj.com/1xhdb0F)

* A 2013 recall of Fiat Chrysler Automobiles NV’s 1.6 million Jeeps over fuel-tank fires is becoming increasingly fraught as customers report a lack of parts and other problems preventing repairs to the vehicles. The challenges were highlighted last week when a Michigan woman died 15 miles from Chrysler Group’s headquarters in a Jeep that had been recalled nearly 16 months earlier. (http://on.wsj.com/1uogwZx)

* Samsung Electronics said it would reduce the number of smartphone models it offers next year, part of a move to cut costs to combat declining profit. It would cut the number of models by about 25 percent to 30 percent, Robert Yi, head of investor relations, said during a presentation in New York. (http://on.wsj.com/1wR87ML)

* Sub-Saharan Africa has long lagged the West in corporate-governance practices, but a growing number of African companies have adopted International Financial Reporting Standards to attract global investors. (http://on.wsj.com/1qQK0LS)

* Sprint Corp’s new Chief Executive Marcelo Claure is shuffling top executives as he tries to turn around the nation’s struggling, third-place wireless carrier. In the memo, Claure named more than two dozen executives who are part of his core leadership team and announced two new positions of chief experience officer and chief procurement officer. (http://on.wsj.com/1Hc2sJt)

* Merck & Co’s drug Zetia proved effective at reducing risk of heart attacks, strokes and other heart problems in a long-awaited trial, marking a milestone in the 40-year-old battle to fight cardiovascular disease by lowering cholesterol. (http://on.wsj.com/11fd8WK)

* SunEdison Inc and clean-power plant subsidiary TerraForm Power Inc are buying Boston-based renewable-energy company First Wind for $2.4 billion, a deal that would make SunEdison the world’s largest renewable-energy-development company. (http://on.wsj.com/1xyQzdE)

* Shipping freight rates from Asia to Europe, the world’s busiest trade route, logged their biggest-ever weekly drop, as European growth is stagnating and Japan just fell back into recession. Analysts said they expected further shipping-rate weakness because the peak demand season for Asian exports ahead of the end-of-year holidays is already over. (http://on.wsj.com/1u4hPcB)

* Honda Motor Co is pushing back the mass-market introduction of its fuel-cell car as it deals with the fallout from a series of safety recalls. Honda now plans to start selling its first mass-market fuel-cell car, which runs on hydrogen and emits only water vapor and heat, in Japan by the end of March 2016 instead of during 2015, Chief Executive Takanobu Ito said. (http://on.wsj.com/11kCiCT)

* The most active mergers-and-acquisitions market in years sped into an even higher gear, as companies took advantage of rising stock prices to announce more than $100 billion in takeover deals. (http://on.wsj.com/1u4a4mV)

 

FT

Former BP PLC chief Lord Browne will step down as the UK government’s most senior business person in Whitehall, halfway through his second term.

British soldiers will be able to use their own smartphones in the line of duty for the first time, while pilots will be carrying iPads as part of a overhaul of digital security measures by defence chiefs.

Insurance claims processor Quindell PLC has responded to months of turmoil by ejecting Rob Terry, its founder and chairman, in a dramatic attempt to revive investor confidence.

Marshall Bailey, president of the ACI Financial Markets Association, has admitted that a shift to regulated, exchange-based trading may be advantageous after the recent rate-rigging scandal

 

NYT

* Federal prosecutors are wrestling with whether to file a civil fraud lawsuit against Angelo Mozilo, the former chief executive of Countrywide Financial, which was at the center of the subprime mortgage boom and bust, people briefed on the matter say. (http://nyti.ms/1xK5wXK)

* Allergan Inc agreed on Monday to be acquired for $66 billion by Actavis Plc in a deal worth $219 a share in cash and stock. It would be the third-largest healthcare deal ever in the United States, according to Standard & Poor’s Capital IQ. (http://nyti.ms/1AaMrRS)

* SunEdison Inc and its publicly traded power plant subsidiary, TerraForm, said on Monday that they would buy First Wind, a leading developer and operator of wind farms, for $2.4 billion. (http://nyti.ms/1xyT4MM)

* The United States Marshals Service announced on Monday that it would auction 50,000 Bitcoins, worth around $19 million, seized in connection with the now-defunct online bazaar Silk Road. (http://nyti.ms/1xhoqq5)

* Goldman Sachs Group Inc executives will again come in for a grilling at a congressional hearing this Thursday. Two of the bank’s executives, along with executives from JPMorgan Chase & Co and Morgan Stanley, will appear at a hearing that will examine the role that Wall Street banks play in the commodities markets. (http://nyti.ms/1uowpzh)

 

Canada

THE GLOBE AND MAIL

** Prime Minister Stephen Harper’s Conservative Party have retained a pair of seats in by-elections on Monday evening, despite a surge by the Liberal Party in the riding formerly held by Jim Flaherty, Canada’s finance minister. (http://bit.ly/1qjrt08)

** The chair of Canada’s largest school board is calling on Ontario Premier Kathleen Wynne’s government to intervene with the board’s highest ranking staffer, alleging that director of education Donna Quan has blocked trustees from probing controversial payments and partnerships. (http://bit.ly/14DBsDG)

** The Competition Bureau is investigating Loblaw Cos Ltd pricing strategies in a probe that is demanding that some of the chain’s key suppliers hand over secret records about their dealings with the grocery giant. (http://bit.ly/1xiBzz2)

NATIONAL POST

** Calvin Nicol, a 31-year-old piercer and tattoo artist was walking home from work along Rideau Street at about 7 p.m. on Nov. 1 when he was attacked by at least four males who Nicol believes singled him out because of his unique look. (http://bit.ly/1yhDodR)

** After release from a U.S. prison, Canada’s embattled Mafia boss Vito Rizzuto summoned top henchmen to secret meetings in Cuba and the Dominican Republic to plot revenge on rivals, a court in Italy has heard. (http://bit.ly/14DLNPR)

** Activist investor Sandell Asset Management Corp is urging pipeline and power giant TransCanada Corp to make big changes to its corporate structure in order to boost its share price. (http://bit.ly/1xLk8pW)

 

China

– Shanghai’s prestigious Fudan University estimated China’s economic growth will reach 7.37 percent this year, it said in its monthly survey of economic and financial data on Monday.

SECURITIES TIMES

 
– China’s financial institutions purchased a net 66 billion yuan ($10.79 billion) foreign exchange in October, the highest in five months, the People’s Bank of China (PBOC) said on Monday.

SHANGHAI SECURITIES NEWS

– Chinese bourses will release an alcohol index in December which will include 25 firms involved in making fiery liquor baijiu, beer and wine, according to the China Securities Index Co Ltd.

CHINA DAILY

– China plans to accelerate the creation of laws covering activities in space, Tian Yulong, secretary-general of the China National Space Administration said on Monday. China landed a probe, the “Jade Rabbit”, on the moon last year.

21st CENTURY BUSINESS HERALD

– China will push forward with price reforms given the current low readings for the consumer price index (CPI) and the producer price index (PPI), Chinese premier Li Keqiang said at a State Council meeting on Saturday.

PEOPLE’S DAILY

– China’s economic development will be driven by continued reforms and innovation, the paper which acts as a mouthpiece for the ruling Communist Party, said in a commentary.

Britain

The Times Christmas turkeys in bird-flu zone as 6,000 ducks are culled

Farms rearing turkeys for Christmas have been restricted from moving their poultry after the first serious outbreak of bird flu in six years. (http://thetim.es/1ETwjSN)

Church of England to allow women bishops After the general synod voted to permit their consecration, the Archbishop of Canterbury has said half of the most senior bishoprics in the Church of England could be held by women in 10 years’ time. (http://thetim.es/1A8CULb)

The Guardian MPs’ report on tax compliance finds HMRC to be slow to take action HM Revenue and Customs is “unacceptably slow” at taking action against tax avoiders, which in turn is reducing the government’s ability to raise revenue, MPs have concluded. (http://bit.ly/1wQwKJd)

Higher Education Commission challenges funding sustainability The long-term consequences of the government’s changes to funding of England’s universities have been called into question by an influential think tank. A report by the Higher Education Commission (HEC) out on Tuesday said measures taken by the coalition had put the sector on a long-term footing that was “far from clear” and criticised politicians for failing to address how to safeguard higher education amid “significant and uncertain future liabilities”. (http://bit.ly/11m8Axp)

The Telegraph

Vodafone in talks with Sky to sell Now TV with broadband Vodafone is in talks to join forces with Sky by basing its forthcoming television service on Now TV, the broadcaster’s Internet streaming set-top box. (http://bit.ly/1vl77Vq) Supermarket groups must close one in five stores, says Goldman Sachs Britain’s biggest supermarket groups must close one in five shops in order to turn around their performance, analysts at Goldman Sachs have warned. (http://bit.ly/1ycM4lT)

Sky News

Controversial Quindell Boss Quits In Clearout Rob Terry, the controversial chairman of Quindell PLC, the listed insurance claims processor, is to step down following a turbulent few months during which billions of pounds have been wiped off its value. (http://bit.ly/1uG9JvC)

M&S Hires John Lewis’s Helen Weir As CFO Marks & Spencer has poached a top executive from the John Lewis Partnership to be its new chief financial officer as the rival retailers enter the crucial Christmas trading period. (http://bit.ly/11wUsm4) The Independent

Bank of England’s Mark Carney says crooked bankers should have pay and bonuses slashed to avoid wrongdoing Mark Carney has claimed bankers’ fixed pay as well as their bonuses should be cut if they behave badly in an effort to reinforce accountability in the City. (http://ind.pn/1t5VqLO)

David Cameron warns of new global economic crisis David Cameron has said the world is on the brink of a second global economic disaster, six years after the crash that “brought the world to its knees”. (http://ind.pn/1xyqBGY)

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS
Domestic economic reports scheduled for today include:
Producer Price Index final demand for October at 8:30–consensus down 0.1%
NAHB housing market index for November at 10:00–consensus 55.0

ANALYST RESEARCH

Upgrades

Discovery (DISCA) upgraded to Neutral from Sell at Citigroup
Manitowoc (MTW) upgraded to Buy from Hold at Jefferies
Prestige Brands (PBH) upgraded to Hold from Underperform at Jefferies
Sony (SNE) upgraded to Buy from Hold at Deutsche Bank
Terex (TEX) upgraded to Buy from Hold at Jefferies
Thoratec (THOR) upgraded to Outperform from Neutral at Credit Suisse
Trinseo (TSE) upgraded to Buy from Neutral at Citigroup
Wright Medical (WMGI) upgraded to Overweight from Equal Weight at Barclays

Downgrades

Allergan (AGN) downgraded to Market Perform from Outperform at William Blair
Allergan (AGN) downgraded to Neutral from Buy at Guggenheim
Allergan (AGN) downgraded to Neutral from Buy at SunTrust
Associated Estates (aec) downgraded to Hold from Buy at Cantor
Basic Energy (BAS) downgraded to Neutral from Buy at SunTrust
CBS (CBS) downgraded to Neutral from Overweight at Atlantic Equities
Himax (HIMX) downgraded to Perform from Outperform at Oppenheimer
Key Energy (KEG) downgraded to Neutral from Buy at SunTrust
Macy’s (M) downgraded to Neutral from Buy at BofA/Merrill
Statoil (STO) downgraded to Neutral from Overweight at JPMorgan
Urban Outfitters (URBN) downgraded to Market Perform from Outperform at Telsey Advisory
Urban Outfitters (URBN) downgraded to Market Perform from Outperform at William Blair
Urban Outfitters (URBN) downgraded to Neutral from Overweight at Atlantic Equities
Walter Investment (WAC) downgraded to Hold from Buy at Evercore ISI
Wells Fargo (WFC) downgraded to Market Perform from Outperform at BMO Capital

Initiations

AK Steel (AKS) initiated with a Market Perform at BMO Capital
Alcoa (AA) initiated with a Market Perform at BMO Capital
Alpha Natural (ANR) initiated with an Underperform at BMO Capital
Arch Coal (ACI) initiated with an Underperform at BMO Capital
CGI Group (GIB) initiated with an Overweight at Barclays
CONSOL (CNX) initiated with an Outperform at BMO Capital
Century Aluminum (CENX) initiated with an Outperform at BMO Capital
Core Laboratories (CLB) initiated with a Buy at SunTrust
Dril-Quip (DRQ) initiated with a Buy at SunTrust
Eagle Point Credit (ECC) initiated with a Buy at Deutsche Bank
Electronic Arts (EA) initiated with an Overweight at Barclays
Forum Energy (FET) initiated with a Buy at SunTrust
Helix Energy (HLX) initiated with a Buy at SunTrust
Intersil (ISIL) initiated with an Outperform at Northland
New Senior (SNR) initiated with a Buy at Compass Point
Noranda Aluminum (NOR) initiated with an Outperform at BMO Capital
OM Asset Management  (OMAM) initiated with a Market Perform at Wells Fargo
OM Asset Management  (OMAM) initiated with a Neutral at Citigroup
OM Asset Management  (OMAM) initiated with an Outperform at Keefe Bruyette
OM Asset Management  (OMAM) initiated with an Outperform at RBC Capital
Open Text (OTEX) initiated with an Overweight at Barclays
Steel Dynamics (STLD) initiated with an Outperform at BMO Capital
Stillwater Mining (SWC) initiated with an Outperform at BMO Capital
Superior Energy (SPN) initiated with a Buy at SunTrust
Tesoro (TSO) coverage resumed with a Conviction Buy at Goldman
U.S. Silica (SLCA) initiated with a Buy at SunTrust

COMPANY NEWS

IBM (IBM) signed EUR 1B contract with Lufthansa (DLAKY)
Sony (SNE) targeting FY17 Pictures sales $10B-$11B, Music sales $4.8B-$5.2B
Disney Movies Anywhere (DIS) now available through Walmart (WMT) VUDU service
SunEdison (SUNE), TerraForm Power (TERP) to acquire First Wind for $2.4B
Xilinx (XLNX) announced an $800M share repurchase plan
Forest Oil (FST) to sell Arkoma Basin natural gas properties for after-tax cash proceeds of approximately $185M
NeoStem (NBS) announced initial positive data from Phase 2 PreSERVE AMI clinical trial

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Home Depot (HD), Corium (CORI)

Companies that missed consensus earnings expectations include:
Jacobs Engineering (JEC), Agilent (A), Urban Outfitters (URBN)

Home Depot (HD) backs FY14 EPS view of about $4.54, consensus $4.50
Jacobs Engineering (JEC) sees FY15 EPS $3.35-$3.85, consensus $3.76
AirMedia (AMCN) reports Q3 EPS (10c) vs.(6c) in Q313
EarthLink (ELNK) sees FY14 adjusted EBITDA $206M-$213M
Inter Parfums (IPAR) sees FY15 EPS 95c-98c, consensus $1.14

NEWSPAPERS/WEBSITES

Sprint’s (S) Chief Marketing Officer to leave company, WSJ reports
Blackstone (BX) to sell 1095 Ave. of the Americas for $2.25B, WSJ reports
Sony (SNE) looking to boost movie entertainment revenue, Reuters reports
AstraZeneca (AZN): ‘Hard to comment’ on whether Pfizer (PFE) will come back, Reuters reports
Nokia (NOK) to launch Android tablet, FT reports (GOOG)
Amtrak files complaint against CSX (CSX), Norfolk Southern (NSC), RailwayAge reports
Halliburton (HAL) could bring ‘substantial gains,’ Barron’s says

SYNDICATE

Advanced Drainage (WMS) files to sell 10M shares for holders
Amicus Therapeutics (FOLD) files to sell $75M in common stock
Continental Building (CBPX) files to sell 7M shares for holders
CorEnergy (CORR) files to sell 13M shares of common stock
Essent Group (ESNT) files to sell 13.8M shares of common stock
GoPro (GPRO) files to sell 9.07M shares for holders
La Quinta (LQ) files to sell 20M shares for holders
Moelis (MC) commences public offering of 5.5M shares of Class A common stock
Pinnacle Foods (PF) announces offering of 20M shares for holders
Receptos (RCPT) files to sell common stock
Rockwell Medical (RMTI) proposes $55M common stock offering
Transgenomic Inc (TBIO) files to sell 1.1M shares for holders

 

 

via Zero Hedge http://ift.tt/1uDlwv5 Tyler Durden

After weeks of relentless flashing red headline barrage whose only purpose was to force snap algo buying of the USDJPY pair time after time after time, Japan is once again out of FX algo danging carrots after moments ago Abe confirmed what everyone had known already: he called a snap election to seek a mandate for his decision to delay by 18 months a further sales-tax increase that had been planned for next year; he also said he would dissolve the lower house of parliament on Nov. 21 in preparation for an election in December, without specifying a date. Cited by the WSJ, Abe said “To ensure the success of Abenomics, I’ve concluded that it shouldn’t be carried out next October and instead be postponed by 18 months,” the prime minister told a nationally televised news conference, stressing that the additional tax burden would risk putting the economy back into deflation. “I will seek the people’s judgment over our economic policy.”

What was left unsaid is that at the very same time the ruling party effectively bribed the population to vote for it after Japan’s FinMin Aso said the government would prioritise passing through parliament a supplementary budget for the current fiscal year to fund a stimulus package, which media reports have said could be worth 2-3 trillion yen (which actually is just a rather tiny $17-$26 billion).

So while Abe is running on hopes that the people will vote for less taxes and more fiscal spending – because the last thing the country with the 230% debt/GDP and which is monetizing all of its debt issuance is, gasp, more austerity – the people may just decide to get rid of him altogether not for his endless barage of promises about the future but for his constant failures in the real world, such as goosing the market by $1 trillion and only getting only lousy recession to show for it.

Bottom line, as Bloomberg noted:

• ABE: LOSS OF MAJORITY WOULD BE REJECTION OF ABENOMICS

And if indeed people vote with their wallets and the electric, food and gas bills on December 14, when Goldman believes the vote will take place, Abe is voted out, watch as the global asset reflation spectacle comes crashing down to earth.

That said, the market reaction was hilarious: one USDJPY regained all the losses from yesterday’s shocking quaruple-dip announcement, and touched 117, then that old “sell the news” kneejerk reaction kicked in just as Abe was holding his press conference. And then, to remind everyone that we live in the new normal after all, the USDJPY was quickly BTFD. End result: a 100 pip move in seconds.

Perfectly normal.

The best news is that no more will the USDJPY jump by 20-100 pips when the very same headline is regurgitated at strategic market inflection points. At least not until Japan comes up with yet another dangling carrot to goose the ever-trigger happy algos.

Elsewhere in Europe, European equities trade in the green with gains of 0.75-1.0% with sentiment largely buoyed by the ongoing events in Japan. More specifically, PM Abe is to delay the sale-tax hike and dissolve Parliament. However, Abe is yet to confirm as to whether or not he will prepare a stimulus package in lieu of the recent GDP numbers. In index specific moves, the IBEX outperforms after being led by Abengoa (+12%) in a pull-back of recent heavy losses with little other major stocks news on offer as European earnings season draws to a close. Elsewhere, fixed income products traded relatively unchanged for a large part of the session until the German ZEW survey which saw the headline expectations figure exceed forecasts by coming in at 11.5 vs. Exp. 0.5 and thus extended the move higher for European equities while dragging fixed income products lower into negative territory.

In summary, European shares rise, close to intraday highs, with the oil & gas and chemicals sectors outperforming and travel & leisure, personal & household underperforming. Japan’s Abe says he’ll dissolve parliament, delay tax hike. German ZEW November investor expectations above estimates. European car sales rise for 14th straight month. Greece’s bailout review said to stall. The German and Spanish markets are the best-performing larger bourses, Swedish the worst. The euro is stronger against the dollar. Japanese 10yr bond yields rise; Greek yields increase. Commodities gain, with natural gas, copper underperforming and gold outperforming.

In Asia, Chinese equities are generally trading weaker following somewhat disappointing home price data whilst bourses are mostly mixed elsewhere. The print has done little to boost sentiment following news that home prices have dropped in 69 out of 70 cities in October relative to September and the average is now 2.6% lower versus last year. The CSI 300 is 1.1% lower as we type whilst the Hang Seng, Kospi and ASX 200 -1.0%, +1.1% and -0.2% respectively. Also in China, Bloomberg yesterday reported that the PBOC has issued rules allowing local financial institutions to invest in yuan assets abroad and in the meantime has refrained setting any limits on the amount that can be invested.

The US docket brings both the PPI and the NAHB housing market index reading. On the former, the market is expecting a -0.1% mom headline number. Away from the data prints, the Fed’s Kocherlakota will be speaking on monetary policy outlook this afternoon, whilst in Europe we will hear from the ECB’s Lautenschlaeger and Knot.

Bulletin headline summary

• European equities trade firmly in the green following on from the latest policy announcements in Japan, while the German ZEW survey surprises to the upside.
• USD/JPY edged higher throughout the session upon anticipation of the announcements from Japan before pulling away from 117.00 in a buy the rumour, sell the fact fashion as the policy decisions were largely priced in by the time they were announced.
• Looking ahead, attention turns towards US PPI data, API inventories and any comments from ECB’s Knot, Fed’s Kocherlaktoa and BoE’s Forbes.

Japan’s Abe called for an early election and delayed for 18 months a second planned sales-tax increase as he sought to extend his term and salvage his Abenomics policies after the country slipped into recession

German investor confidence rose for the first time in 11 months as the ZEW index increased to 11.5 in November (est. 0.5) from -3.6 in October

U.K. inflation unexpectedly accelerated last month as transport prices fell less than a year earlier and the cost of toys rose in the run-up to Christmas

Greece’s government and its international creditors are deadlocked over a final round of measures required to release the last tranche of the country’s bailout, two people familiar with the negotiations said

Chinese new-home prices dropped in October in 67 of 70 cities tracked by the government from a year earlier, according to the National Bureau of Statistics; prices in Beijing declined 1.3%, the first annual decrease since November 2012

Reserve Bank of Australia governor Stevens sees accommodative policy continuing for some time, cites spare capacity, controlled inflation

Even if Mary Landrieu (D-LA) is able to win passage of her Senate bill tonight to approve the Keystone XL oil pipeline, analysts said it may not be enough to affect the outcome of her re-election bid

Goldman says it’s adding staff to its European ABS business as the bank prepares for a resurgence in the $305b market that shrank more than 40% over the past four years

Sovereign yields mixed. Asian stocks mixed, Nikkei +2.1%, Shanghai -0.7%. European stocks gain, U.S. equity-index futures decline. Brent crude gains,  copper little changed, gold +1.4%

US Economic Docket

• 8:30am: PPI Final Demand m/m, Oct., est. -0.1% (prior -0.1%)
  • PPI Ex-Food and Energy m/m, Oct., est. 0.1% (prior 0.0%)
  • PPI Final Demand y/y, Oct., est. 1.3% (prior 1.6%)
  • PPI Ex-Food and Energy y/y, Oct., est. 1.5% (prior 1.6%)
• 10:00am: NAHB Housing Market Index, Nov., est. 55 (prior 54)
• 4:00pm: Net Long-term TIC Flows, Sept. (prior $52.1b); Total Net TIC Flows, Sept. (prior $74.5b)
• 1:30pm: Fed’s Kocherlakota speaks in St. Paul, Minn.

Market Wrap

• S&P 500 futures down 0.1% to 2037.4
• Stoxx 600 up 0.6% to 339.2
• US 10Yr yield down 1bps to 2.33%
• German 10Yr yield down 1bps to 0.8%
• MSCI Asia Pacific up 0.6% to 140.6
• Gold spot up 1.3% to $1201.5/oz

FX

Following the expectations of announcements from Japan, USD/JPY ebbed higher throughout the session and in close proximity to the 117.00 handle, however, the pair proceeded to pull away from these levels as by the time they were announced the news was already priced into the market. Nonetheless, this move to the downside was halted by talk of leveraged names on the bid in the pair. GBP/USD traded higher following the last UK inflation report which saw the Y/Y CPI figure come in at 1.3% vs. Exp. 1.2% and thus avoided the dovish surprise that some had been expecting in the backdrop of last week’s QIR which warned that inflation could drop below 1.0% in the next 6 months. Elsewhere, broad-based USD strength has led EUR/USD to consolidate its move above 1.2500. Furthermore, the EUR strength has seen EUR/AUD trade higher by over 100 pips with the move to the upside exacerbated by comments from RBA governor Stevens who said a further AUD fall is likely to happen.

COMMODITIES

WTI and Brent crude prices enter the North American crossover in the green in a modest recovery of recent losses ahead of the upcoming OPEC meeting. In terms of notable commentary the Russian and Venezuelan oil ministers are said to be planning a meeting whereby they will discuss the need to coordinate actions in defence of prices. Furthermore, one thing for energy traders to keep an eye on today is the US Senate vote on the future of the Keystone XL pipeline, whereby those in favour of the bill need to secure 60 votes to prevent a filibuster by opponents. Elsewhere, spot gold broke above USD 1,200 to print its highest price this month alongside the weaker USD and fresh geopolitical concerns from the Israeli/Palestine situation. More specifically, Israel’s Netanyahu says Israel will react with an `iron fist` to an attack where 4 Israelis were killed and several others wounded in a terror attack in a synagogue in the western Jerusalem neighbourhood of Har Nof.

* * *

Deutsche Bank’s Jim Reid completes the overnight recap

Did Government QE in Europe get closer yesterday? It probably did slightly after Draghi comments to lawmakers at the European Parliament but to be honest markets are probably going to need more to be convinced that it will eventually happen. We still think Q1 2015 is the likely announcement time as taboos are being slowly broken down. To recap what Draghi said in his quarterly testimony, he said “Other unconventional measures might entail the purchase of a variety of assets, one of which is sovereign bonds”. He did say monetary policy alone can’t bring the economy back on track but it’s clear to us that the ECB are edging closer to action. Markets in Europe certainly appreciated the comments. The Stoxx 600 closed the day +0.48%, although traded as low as -0.8% pre-statement whilst peripheral assets finished stronger with 10yr yields in Spain, Italy and Portugal rallying 1bp, 4bps and 4bps respectively. The ECB’s Mersch was also dovish earlier, suggesting that the central bank could theoretically purchase a range of assets including sovereign debt, gold and ETFs. However his comments were a little more caveated than Draghi’s noting that such a decision must be subject to a cost-benefit analysis.

In Japan this morning the market has turned its focus away from yesterdays GDP print and onto a report from the Japanese Yomiuri newspaper suggesting that Abe could hold a press conference as soon as today with regards to delaying the sales tax increase. Following this we’ve also had a news report out of the Nikkei Review suggesting that the Prime Minister is expected to tell his ministers today to assemble a stimulus package focusing on consumer spending. The package is expected to total ¥2tn to ¥3tn with the aim of stimulating what has been fairly subdued consumer spending over recent times. Bloomberg and other wires are also suggesting that he will call an early election today with December 14th mooted as a possible date. The market appears to be expecting some sort of confirmation of the above packages with the Nikkei +2.2% and Topix +2.1% as we type.

With the news from yesterday that Japan is back in recession again it got us thinking about our shorter business cycle theory that we established back in 2010. The theory has worked spectacularly well across pretty much most of the DM world apart from the most important country namely the US. However outside the US, parts of Europe have been in and out of recession since and yesterday it re-claimed another victim with Japan in recession again for the third time post-GFC. The theory was based on the ‘great moderation’ (1980-2008) super cycles being driven by total flexibility of monetary and fiscal policy and that post crisis both would be far less able to be stretched at will. Most governments were looking to be or being forced to be more disciplined fiscally with a liquidity trap at the zero bound preventing monetary policy being used anywhere near as effectively as it had been during the prior decades. Policy has indeed been compromised but what we’ve also learned from this period is that fiscal is perhaps more important for growth and monetary policy for asset prices. The US maxed out on both beyond what most would have thought possible which helped avoid our shorter cycle theory and pump up asset prices whereas Europe implemented austerity around 2011/2 and Japan raised taxes earlier this year. Both sparked recessions. So we think the theory is still a valid one unless you’re able to max out on stimulus beyond what anyone would have thought possible a few years back. The US has been virtually the only country to so far pull this off and maybe the only country that might manage to do so.

Anyway back to looking at the rest of Asia this morning. Chinese equities are generally trading weaker following somewhat disappointing home price data whilst bourses are mostly mixed elsewhere. The print has done little to boost sentiment following news that home prices have dropped in 69 out of 70 cities in October relative to September and the average is now 2.6% lower versus last year. The CSI 300 is 1.1% lower as we type whilst the Hang Seng, Kospi and ASX 200 -1.0%, +1.1% and -0.2% respectively. Also in China, Bloomberg yesterday reported that the PBOC has issued rules allowing local financial institutions to invest in yuan assets abroad and in the meantime has refrained setting any limits on the amount that can be invested.

In terms of the rest of markets yesterday, with headlines dominated by Draghi it was easy to overlook what was a relatively solid expansion in the Eurozone September trade balance surplus to €17.7bn from €15.4bn in August. Over in the US the S&P 500 continued its trend of modest gains, closing +0.07% on the day. After a recent flurry of strong data, readings yesterday were fairly disappointing with misses in empire manufacturing (10.16 vs. 12 expected), industrial production (-0.1% vs. +0.2%) and capacity utilization (78.9% vs. 79.3% exp.). Elsewhere a research paper from the San Francisco Fed mentioned that inflation will remain low in the near future with the ‘probability of low inflation by the end of 2016 being twice as high as the probability of high inflation’. Just wrapping up market moves, the Dollar closed stronger on the day versus most major currencies, with the DXY +0.47% whilst both WTI and Brent extended declines, down -0.42% and -0.47% respectively.

Looking at the highlights today we will kick off with the CPI/RPI/PPI prints out of the UK. Our UK colleagues argued that the market reaction to the latest BoE November inflation report in which markets priced out the chances of an early tightening was not an appropriate response to what was said in the report. Instead they suggest that the Bank remains optimistic about economic growth despite Eurozone concerns and continues to see inflation rising back to target over the horizon forecast, supported by better wage inflation numbers. So it’ll be interesting to see how the market reacts to today’s figure. We will also be keeping an eye on the ever-important ZEW survey reading out of Germany and the Eurozone. In the afternoon our focus will cross to the other side of the pond where we will get both PPI and the NAHB housing market index reading. On the former, the market is expecting a -0.1% mom headline number. DB’s Joe Lavorgna shares the same forecast and as mentioned in yesterday’s report, notes that investors should keep a keen eye on the price data for ‘selected healthcare industries’ which is used to estimate the healthcare component of the PCE deflator. Away from the data prints, the Fed’s Kocherlakota will be speaking on monetary policy outlook this afternoon, whilst in Europe we will hear from the ECB’s Lautenschlaeger and Knot..

via Zero Hedge http://ift.tt/1EYXRZ3 Tyler Durden