For the fourth consecutive night, futures attempted to storm higher, and were halted in their tracks when the USDJPY failed to rebound from the recalibrated 107 tractor beam, following a statement by the BOJ’s former chief economist and executive director (until March 2013) who said that now is the time for the Bank of Japan to begin tapering. Needless to say, there could be no worse news to bailout and liquidity-addicted equities as the last thing a global rigged market can sustain now that QE is about to end in two weeks, is the BOJ also reducing its liquidity injections in the fungible world. This promptly took away spring in the ES’ overnight bounce.
Not helping matters is the continuing selloff in oil, which as we reported first yesterday, has hit the most oversold levels ever, is not helping and we can only imagine the margin calls the likes of Andy Hall and other commodity funds (ahem Bridgewater -3% in September due to “commodities”) are suffering.
But the nail in the coffin of the latest attempt by algos to bounce back was the news which hit two hours ago that a second Ebola case has been confirmed in Texas, and just as fears that the worst is over, had started to dissipate. Expect transports to continue their bipolar moves, and following yesterday’s jump – the best in one week – today will be profit taking day ahead of what is increasingly shaping up to be a big “one-time, non-recurring” fourth quarter EPS crash for airlines due to the great Ebola scare of Q4.
In terms of markets, Asian markets have bounced off their opening lows with equity benchmarks moderately higher in China, Japan and Hong Kong. This follows on the modest gains in the S&P 500 (+0.16%) yesterday as the market once again averted a four-day rout. US Banks’ results were a little bit mixed though the mood is still dictated by the ongoing question marks around global growth. Taking at a look at the movers and shakers the market was once again weighed down by Energy stocks with Oil prices taking another beating yesterday. Brent and WTI were -4.3% and -4.6% lower at US$85.0/bbl and US$81.8/bbl by the end of the US session driving them even deeper into bear market territory. IEA’s forecast of the slowest oil consumption growth since 2009 didn’t help. The impact was clearly felt by Oil producers with the likes of Chevron, Schlumberger and ConocoPhillips down -2.25%, -1.97% and -1.87% respectively on the day. The S&P 500 Energy sub-sector index officially tipped into bear market territory after yesterday’s sell-off, putting it 20.1% off its June highs.
After falling in the Asia-Pacific session, T-notes have regained some poise in the European morning, as spill-over buying in both Bund and Gilt futures pressed German 10yr yields to record lows once more after a softer start for European stock markets. UK jobs numbers initially weighed on Gilts, as real wage growth in the UK rose to -0.3% from -0.8% on an ex-bonus basis, however weaker jobless claims change numbers (-18.6K vs. Exp. -35.0K) suggested a lack of follow-through in labour market strength, prompting Gilts to reverse course and hit session highs.
Looking at the day ahead, we have the Beige Book, Retail Sales, Empire state survey, and the monthly budget from the US. Other than Germany’s inflation data it should be a quiet day for European data flow. Draghi’s speech in Frankfurt this morning will also grab some attention. In terms of earnings Bank of America, American Express and eBay are probably the highlights.
Bulletin Headline Summary from Bloomberg and RanSquawk
- The FTSE-100 lags European equities as AbbVie’s decision to reconsider their deal with Shire (SHP LN) wipes GBP 6bln from the Co.’s market cap
- Softer equities have provided further support for fixed income products with the German 10yr yield once again printing a record low and the Dec’14 Bund printing yet another contract high
- Looking ahead, attention turns towards as slew of US data points, with empire manufacturing, retail sales, PPI and API’s all due for release.
- Treasuries steady, with 10Y yields at lowest since June 2013, 2Y at lowest since May; oil in a bear market amid signs global growth is slowing.
- Central bankers are discovering that cheaper energy can be a headache, especially when warding off deflation is the economic challenge du jour
- Amid questions of whether U.S.-led airstrikes can stop the extremist Sunni group from gaining territory in Iraq and Syria, Obama defended his strategy as he met yesterday with top military commanders from 21 countries allied with the U.S.
- A second health-care worker in Texas tested positive for Ebola after caring for a patient with the deadly viral illness, adding to concern that infection controls at U.S. hospitals aren’t strong enough
- Concern about the deadly disease has started to affect investor psychology, contributing to a decline in global airline stocks; the S&P 500 Index fell 1.2% in an hour on Oct. 13 following reports that plane passengers in Boston were hospitalized with flu-like symptoms
- The BOJ should start paring its unprecedented easing soon or risk hurting people, the bank’s former chief economist Hideo Hayakawa said in an interview, as pushing inflation to a 2% target in a short period will raise living costs without boosting employment or growth
- U.K. unemployment fell more than forecast to the lowest in six years and wage growth picked up for a second month
- Russia warned that Ukraine is running risks by allying with Europe and faces deadlock unless it decentralizes power as Ukrainian forces repelled another attack by separatists on Donetsk Airport
- Hong Kong police said they would investigate a complaint alleging officers beat a pro-democracy protester during clashes early this morning over control of a key road
- Sovereign yields mixed, with U.K., Germany and U.S. lower, EU peripherals higher; Greece 10Y at 7.369%. Asian stocks mostly higher, European stocks, U.S. equity-index futures decline. WTI crude falls, Brent slumps as much as 2% to lowest since Nov. 2010; gold and copper lower
