And the overnight futures ramp started off so promising.
Now that Abenomics has officially failed (because even Goldman is providing reasons why it didn’t work), and Abe is being deserted by his ministers left and right, and not just any ministers but women – the same gender which he has been swearing recently he will do everything in his power to get better employment positions – the Nikkei news service disseminated yet another (no really) blurb about the only leverage Japan has, namely that the $1.2 trillion pension fund will boost its stock allocations from 12% to 25%. Putting this in context it means, that instead of holding $144 billion, the GPIF would own $300 billion, or… just about 3 months worth of Japanese POMO!
Alas, the Mrs Watanabe Kamikaze pilots are unable to do simple math and inversely plunged headfirst into headline, sending the TOPIX +4% overnight, just days after it re-entered bear market territory, because there clearly is nothing like “price stability” of an entire nation’s equity index trading like a pennystock on steroids. The headline pushed the USDJPY higher by about 70 pips from the Friday close to just under 107.5, and US equity futures up to just about 1900, before more somber and rational voices took over and picked up on Rosengren’s comment from last night that QE3 is ending, absent some dramatic change (like a 5% “plunge” in stocks?), and the USDJPY was back under 107 at last check, with futures back in freefall mode.
For whatever reason, futures have faded the entire move higher, and the huge IBM earnings miss which was announced moments ago will hardly help with the tone today. In fact, the only thing that may be helpful is for Rosengren to do a DieselBOOM and retract.
Overnight, the Nikkei 225 (+3.98%) posted its biggest 1-day gain in over a year, and back above the key 15000 level, exiting correction territory. The index underpinned by reports that the GPIF is working out plans to increase its portfolio allocation to domestic stocks to around 25% from 12%. However, despite a gap higher in European stock futures at the open, the domestic news in Japan failed to feed through and once cash equity trade resumed downward pressure soon was felt from heavyweights SAP (-4.2%) and Philips (-3.9%), both of which issued disappointing earnings reports. The FTSE MIB has outperformed its peers following confirmation this morning that the ECB has started its purchases of covered bonds.
Looking to the day ahead, we have German September PPI (expected at 0% MoM) and Italian August industrial orders and sales (with the former expected in at +0.2% MoM). On top of these data reads, the ECB’s Coeure is speaking today in London whilst the EU and Japan are holding trade talks in Brussels. We will also have earnings from SAP, Apple and IBM today as Q3 earnings season presses on.
Bulletin Headline Summary from Bloomberg and RanSquawk:
- Nikkei 225, finishes up 3.98%, supported by comments that the GPIF is working out plans to increase its portfolio allocation to domestic stocks to around 25% from 12%
- Focus on disappointing earnings updates from heavy weights SAP, Philips & IBM who are seen down 6% in pre-market
- Looking ahead direction will likely be dictated by the performance of Wall Street with a lack of scheduled macro events, Apple due to report after-market
- Treasuries decline, 10Y yields 2.21% after last week’s rally that saw yield slide as much as as much as 33.5bps to 1.862%, lowest since May 2013.
- Last week’s market gyrations sparked questions about whether bank regulations implemented after the 2008 financial crisis exacerbated price declines by limiting the ability of Wall Street banks to make markets
- ECB bought short-dated French covered bonds today, according to three people familiar with the matter, who asked not to be identified because they’re not authorized to speak about it
- The ECB’s unprecedented inspection of lenders’ books will help end a slump in lending that’s dogged southern Europe for years, said executives at some of the region’s largest banks
- France’s finance and economy ministers fly to Berlin today to try to convince their German counterparts of their plans to improve competitiveness and to press for more investment
- Fed policy makers are missing a key element as they assess the health of the labor market: data that includes whether those who are employed are overqualified for their job or would like to work more hours
- Russia’s foreign minister said his country will refuse to accept conditions to end sanctions after talks in Italy failed to produce a breakthrough over the truce in Ukraine’s conflict-ridden east
- Protest leaders will meet government officials tomorrow for talks to end more than three weeks of pro-democracy demonstrations, as Hong Kong’s top official blamed foreigners for adding to the foment
- Obama put aside closed-door fundraisers for a few hours and stepped onto the stages at rallies for allies running for governor in Illinois and Maryland, two heavily Democratic states
- Sovereign yields mixed, EU peripheral yields decline. Asian stocks surge. European stocks fall, U.S. equity-index futures higher. Brent crude lower, gold and copper gain
