Yesterday it was the Fed’s latest intervention in capital markets, when shortly after yet another ghastly open, the Fed’s Bullard added some PPTness to stock when he first said that the Fed “should delay in ending QE”, only to backtrack several hours later he was nervous about “staying at zero” and that the Fed is “not too far from its employment goals.” Of course, the only thing the algos heard was a delay in QE and following on John Williams’ comment earlier in the week, have now reverted to the old central-planning regime where the Fed (and other central banks) will step in the second there is even the smallest market correction, because in the New Normal price discovery is illegal and punishable by breaking markets, such as yesterday’s DirectEdge failure at just the right time.
And yet, if the last three days all started with a rout in futures before the US market open only to ramp higher all day, today it may well be the opposite, when shortly after Europe opened it was the ECB’s turn to talk stocks higher, when literally within minutes of the European market’s open, ECB’s Coeure said that:
- COEURE SAYS ECB WILL START WITHIN DAYS TO BUY ASSETS
Which was today’s code word for all is clear, and within minutes US futures, which until that moment had languished unchanged, soared by 25 points. So will today be more of the same and whatever early action was directed by the central bankers will be faded into a weekend in which only more bad news can come out of Ebola-land?
Then again, luckily algos have zero sarcasm tolerance because if they were delighted to respond to ECB’s “good cop” Coeure, then they would have puked moments after yet another ECB member, Constancio, rejected everything Coeure said:
- CONSTANCIO: CEN BANKS SHOULDN’T BE MARKET MAKERS OF LAST RESORT
One can only smile with a market in which the only thing missing is the central banks’ advance report of the EOD closing print. Because fair and efficient went out of the window years ago: case in point yesterday’s DirectEdge breaking just as the selling intensified, just to prevent retail from piling into the fray and making the PPT’s momentum ignition inflection point impossible. The regulatory approach to “risk” was made even clearer when today Italian authorities took action to stem the downside and prohibit short-selling in Banca
Monte dei Paschi whose shares had been suspended after they struck record lows
yesterday.
But at least thanks to central planner regaining the upper hand in determining the “fair value” of assets, Greece is once again fixed when its 10 Year bond has soared from over 9% yesterday to just barely above 8% today… on absolutely no volume. Clearly, this is nothing but price discovery in its most purest.
In bond land, core Eurozone bond yields have risen alongside equities, with
Germany’s 10yr yield rising back toward 0.85% as the IT/GE and SP/GE
yield spread tightens. The German curve trades steeper, with the 2s/30s
wider by over 4bps as the market continues to unwind their heavy
flattening bias observed since the beginning of the week.
In Europe, equities have recovered a small part of the week’s losses early doors, with the modest bounce led by peripheral equities driven by the abovementioned halt in Monte Paschi shorting. The energy sector leads the gainers, with the stabilisation of crude prices above USD 82/bbl the primary catalyst, but also hopes of a resolution to the gas row between Russia, the EU and Ukraine – with talks due to be held later today. The FTSE-100’s recovery has been stalled by Rolls-Royce Holdings, whose shares fell 8% at the open after cutting their forecast for revenue growth due to deteriorating economic conditions (primarily Russian sanctions). Later today, further US earnings take focus, with General Electric and Morgan Stanley due.
