Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
"Risk Off" - Global Stocks Slide As Yen Surges To 17 Month High; Bund Yields Plunge
04-05-2016, 07:11 AM,
#1
"Risk Off" - Global Stocks Slide As Yen Surges To 17 Month High; Bund Yields Plunge
"Risk Off" - Global Stocks Slide As Yen Surges To 17 Month High; Bund Yields Plunge

<p>The market's slumberous levitation of the past month, in which yesterday's -0.3% drop was the second largest in 4 weeks and in which the market had gone for 15 consecutive days without a 1% S&amp;P 500 move (in March 2015 the sasme streak ended at day 16) may be about to end, after an overnight session, the polar opposite of yesterday's smooth sailing, which has seen a sudden return of global risk off mood. </p> <p>It all started in Japan, where the yen jumped to a 17-month high and government bonds climbed as increasing concern that global economic growth is faltering stoked demand for haven assets, catalyzed perhaps by yesterday's shocking US Treasury announcement that tax inversion deals are all but dead, in the process send Allergan stock lower by 20% and crushing countless M&amp;A arbs. Additionally, the Yan overnight appreciated even after Bank of Japan Governor Haruhiko Kuroda said he will keep monitoring foreign-exchange markets and reiterated the potential for additional monetary stimulus. </p> <p>According to FX watchers the critical USDJPY carry pair may test a break of 110 as Suga’s FX remarks are unlikely to halt FX pair’s decline at this point as market players probably don’t believe Japan can intervene in market anytime soon, says FPG Securities CEO Koji Fukaya. </p> <p>The surge in the Yen pushed Japan's closely correlated Nikkei another 2.4% lower to 15,732 as it rapidly approaches its February 12 lows of 14,952. We wonder how much longer Abe and Kuroda will be content to comply with the "Shanghai Accord" whose only purpose was to stem Yuan devaluation at the expense of a strong Yen and Euro. Another 5% drop in the Nikkei and suddenly rumors will reemerge that Abe's career-ending bout of diarrhea may be returning; and since Japan's QE is critical to maintaining global asset prices, the recent bout of USD weakness (and Yuan strength) may be very short-lived.</p> <p>It wasn't just Japan and the Yen: in Germany bunds climbed after an unexpected drop in factory orders (down -1.2%, exp. 0.3%), with Bund yields sliding below 0.1% (0.07% to be precise) for the first time since April 2015, when the great Bund Tantrum struck which as even Goldman has admitted, was driven by ECB intervention. Will Draghi dare to sell European TSYs even as he is now actively buying Corporate IG bonds, in the process destabilizing the even more illiquid European bond market? We may find out soon. </p> <p>European sentiment has also been dampened from the lacklustre PMI readings from European nations with the French services reading slipping into contractionary territory, while the final PMI for Germany, Italy and the EU composite all missed: Europe may be rolling over again. </p> <p>"There are worries about the global economy,” Christian Reicherter, an analyst at DZ Bank AG in Frankfurt told Bloomberg. “In this environment, bunds are still the place to go", and indeed, the chart below confirms just that.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/03/27/bund%204.5.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/03/27/bund%204.5_0.jpg" width="600" height="338" /></a></p> <p>&nbsp;</p> <p>Other were just as pessimistic: "Across Europe, the rally from Feb’16 lows is faltering and we expect<br /> downside risks to dominate. Europe’s underperformance vs. the SPX (in<br /> dollar terms) also shows no signs of abating”, JPMorgan analysts led by<br /> Sunil Garg say.</p> <p>As a result, stocks fell around the world, along with emerging-market currencies.&nbsp; All 30 stocks in Germany’s DAX Index fell after an unexpected drop in factory orders. The Stoxx Europe 600 Index sank to a five-week low and U.S. equity futures pointed to a second day of losses. South Africa’s rand and the South Korean won led declines for developing-nation currencies. Gold advanced the most in a week, and oil dropped for a third day before stockpiles data.</p> <p><strong>This is where markets are now:</strong></p> <ul> <li>S&amp;P 500 futures down 0.9% to 2040</li> <li>Stoxx 600 down 1.9% to 329</li> <li>FTSE 100 down 1.4% to 6081</li> <li>DAX down 2.4% to 9583</li> <li>German 10Yr yield down 4bps to 0.09%</li> <li>Italian 10Yr yield down 1bp to 1.23%</li> <li>Spanish 10Yr yield down less than 1bp to 1.46%</li> <li>S&amp;P GSCI Index down 0.2% to 310.8</li> <li>MSCI Asia Pacific down 1.6% to 124</li> <li>Nikkei 225 down 2.4% to 15733</li> <li>Hang Seng down 1.6% to 20177</li> <li>Shanghai Composite up 1.4% to 3053</li> <li>S&amp;P/ASX 200 down 1.4% to 4924</li> <li>US 10-yr yield down 4bps to 1.72%</li> <li>Dollar Index up 0.11% to 94.62</li> <li>WTI Crude futures down 0.3% to $35.59</li> <li>Brent Futures down 0.3% to $37.59</li> <li>Gold spot up 1.5% to $1,233</li> <li>Silver spot up 1.6% to $15.16</li> </ul> <p><strong>Top Global News</strong></p> <ul> <li>Pfizer-Allergan Deal May Be Imperiled by U.S. Inversion Rules: new rules may put a planned $160 billion merger between Pfizer and Allergan in jeopardy; Allergan Falls After Treasury Rules Announced; Pfizer Gains</li> <li>UBS, HSBC Offshore Dealings Thrust Into Panama Papers Spotlight: report describes UBS’s dealings with law firm Mossack Fonseca; both banks say they comply with laws for vetting customers; ‘Panama Papers’ Train New Spotlight on Global Elites’ Wealth</li> <li>Tesla Deliveries Miss Forecast as ‘Hubris’ Hurts SUV Supply: automaker sold 14,820 Model S cars and Model X SUVs in 1Q, short of the 16,000 it had predicted in February; Tesla Motors CIO Vijayan Leaves to Launch Own Startup: WSJ</li> <li>Valeant Creditors Said to Resist Proposal to Relax Loan Pact: co. facing push back from some of its lenders as it seeks to waive a default, loosen restrictions on its debt; Valeant Said to Cut Libido Pill Sales Force in Reorganization</li> <li>Disney Says Staggs Stepping Down as Chief Operating Officer: departure complicates efforts to find heir to CEO Robert Iger; executive is said to have struggled to gain support of board</li> <li>Pimco Says Bill Gross Was Told He’d Lose $200 Million Bonus: firm responds in suit saying CEO and counsel warned co- founder</li> <li>Sumitomo Mitsui to Charge Fees on Accounts of Overseas Lenders: goal is to recover costs of the BOJ’s negative interest rates; Mitsubishi UFJ, Mizuho considering similar steps</li> <li>Vale Seeking to Trim Debt Exits ThyssenKrupp Steel Venture: ThyssenKrupp to gain full control of embattled Brazilian mill; Vale free from plant’s debt obligations</li> <li>Lagarde Cites ‘Brexit’ Among Geopolitical Risks to Global Growth: IMF Managing Director Lagarde cited the U.K.’s June referendum on exiting the EU among threats to the global economy; U.K. Growth Subdued as ‘Brexit’ Hurts Confidence, Markit Says</li> <li>Trump Faces Biggest Test Yet in Tuesday’s Wisconsin Primary</li> <li>Samsung Bioepis Sues AbbVie Over Humira Patent: Korea Economic Daily</li> </ul> <p><strong>Looking at regional markets, Asian stocks resided in negative territory </strong>following a similar lead from Wall St. as declines in oil weighed on risk-appetite. Nikkei 225 (-2.6%) was the underperformer and fell below 16000, pressured by a stronger JPY and losses in index giant Fast Retailing following a decline in Uniqlo sales. Weakness seen in the commodities complex dictated sentiment in the ASX 200 (-1.4%) with energy the laggard after WTI fell below USD 36/bbl, while the Shanghai Comp (+1.5%) shrugged off its initial losses amid gains in defensive stocks and after the PBoC conducted a respectable liquidity injection. 10yr JGBs traded lower despite the downbeat tone and a firm 10yr auction which drew the highest b/c since 2014, as early weakness persisted following comments<br />from BoJ officials including Governor Kuroda who stated they are not placing particular focus on NIRP.</p> <p>BoJ Governor Kuroda said it is technically possible to cut rates further into negative territory if required, but also added they are not placing particular focus on NIRP as possible future measures. Elsewhere, BoJ is considering downgrading inflation outlook in its economic outlook report later this month amid lower expectations from households and businesses.</p> <p><em>Top Asian News</em></p> <ul> <li>Rajan Cuts India Rates to Five-Year Low, to Stay Accommodative: RBI narrows policy rate corridor to 50 bps from 100 bps</li> <li>‘Panama Papers’ Train New Spotlight on Global Elites’ Wealth: Leaked files draw outrage from leaders named in group’s report</li> <li>Race Against a Weaker Yuan Spurs Chinese Overseas Acquisitions: Outbound deals top $97 billion this year, 80% of 2015’s total</li> <li>Bond Market ‘Exhausted’ as Kuroda’s Stimulus Enters Fourth Year: Low yields accompanied by high volatility, money market stress</li> <li>China Reserves Slide Seen Easing, Yet Dam-Bust Still a Risk: Test will come if Fed tightening expectations return</li> <li>Yen Climbs to Strongest Since 2014 as Kuroda Monitors Market: Yen is best performer among Group of 10 currencies this year</li> <li>China Said to Plan $155 Billion of Sour Loan-Equity Swaps: Swaps may lift banks’ net profits by 4% a year, Huatai says</li> </ul> <p><strong>In Europe, risk off sentiments dominates price action in Europe with the Eurostoxx </strong>(-2%) hit by the slump in mining and energy names. Separately, financials have also underperformed so far today in the wake of the Panama Papers scandal, with Credit Suisse lower by 3.5%. Allied to this, sentiment has also been dampened from the lacklustre PMI readings from European nations with the French services reading slipping into contractionary territory, while Germany also posted softer than expected factory orders. Subsequently, Bunds gained on the back of flight-to-quality flow to make a firm break above 164.00 with the yield curve continuing its bull-flattening bias. As such, yields broke below 0.10% having fallen to its lowest level in a year.</p> <p><em>Top European News</em></p> <ul> <li>German Factory Orders Unexpectedly Fall on Exports Slowdown: orders fall 1.2% on month vs estimate of 0.3% increase; Feb. decline led by sluggish growth in global trade; German Growth at Risk Amid Global Economic Slowdown: OECD</li> <li>Euro Area Growth Stays ‘Sluggish’ as Markit Index Revised Lower: euro-area economy grew slower than initially anticipated at the end of 1Q, according to Markit Economics, which revised down a key index of activity</li> <li>Thousands of Icelanders Protest as PM Ignores Calls to Quit: protests after leaked documents suggested PM Gunnlaugsson allegedly benefited from offshore investment accounts in tax havens</li> <li>Credit Suisse CEO Says ‘Best Time’ to Grow in Asia as Rivals Cut: CEO said now is the “best time” to expand in Asia because retreats by some competitors make it easier to find top recruit</li> <li>Peugeot Tumbles as Expansion Spending Weighs on Profit Margins: co. predicted that spending on new models and technology would weigh on profit in coming years</li> <li>Gemalto to Propose Vallee as Successor to CEO Piou: COO Vallee to succeed CEO Olivier Piou who will retire at end of Aug.</li> <li>Europe’s Central Banks Begin Boosting QE Price Transparency: Bank of France to follow Dutch in taking steps toward greater transparency, person familar with plan says</li> </ul> <p><strong>FX markets active this morning, but with the JPY stealing the limelight as the USD rate pushes below the March lows to take out 110.50</strong>. 110.00 holds for now, but the price action since suggests a test of this key level is imminent. Large stops reported below, but official warnings (chief government spokesman) that markets are being monitored also been fired out there, but to no effect as yet. The Yen appreciated even after Bank of Japan Governor Haruhiko Kuroda said he will keep monitoring foreign-exchange markets and reiterated the potential for additional monetary stimulus.</p> <p>AUD saw a brief relief rally post RBA, as the language remained very much the same, but as with the NZD and CAD, sellers have been back in since, and we have set fresh series lows in AUD and NZD, but CAD still holding off the Friday lows just ahead of 1.3150. UK services PMI came in as expected, but EUR/GBP continues to threaten .8000+ levels. Cable has held off 1.4200 for now, but no notable recovery to the likes of that seen in recent sessions. EUR/USD still poised for a breakout either way, holding inside Friday limits for now, but with a small bias to the downside after taking out the Monday base at 1.1355. The euro slid 0.2 percent to $1.1365, while the pound dropped 0.2 percent to $1.4229.<br />&nbsp;<br /><strong>In commodities, a choppy session has seen WTI and Brent futures pare back losses seen in Asian and early European trade, </strong>with comments from the Kuwaiti OPEC governor suggesting a deal is still likely in Doha helping bolster WTI prices back above USD 35.50/bbl. Elsewhere, gold has been on the march overnight, climbing by over USD 15/oz to trade above USD 1230/oz in a flight to quality amid the USD/JPY softness. The metals complex was also underpinned on the return of Chinese participants which helped copper snap a 7-day losing streak, while iron ore underperformed on increasing supply from its main exporter nations.</p> <p>Copper for delivery in three months was set to end the longest losing streak in two years, advancing for the first time in eight sessions. The metal was up 0.5 percent at $4,785 a metric ton. Aluminum was little changed, while zinc fell 1.5 percent.</p> <p>On the US calendar today, we get the February trade balance reading where expectations are for a modest widening in the deficit. We’ll then get confirmation of those PMI numbers before the closely watched ISM non-manufacturing print for March is due to be released (expected to tick up to 54.2 from 53.4 the prior month) where there will be a close watch on the employment component in particular. The IBD/TIPP economic optimism reading for April and February JOLTS job openings data concludes the releases. Away from the data we’re due to hear from the Fed’s Evans shortly after we go to print.</p> <p>&nbsp;</p> <p><strong>Bulletin Headline Summary from RanSquawk and Bloomberg</strong></p> <ul> <li>USD/JPY touches its lowest level for 18 months, with EUR/USD &amp; GBP/USD heading into the North American crossover near their lows of the day</li> <li>European equites trade firmly in the red, led lower by materials, financials and energy names</li> <li>Looking ahead, highlights include US JOLTS, ISM Non-Manf and Services &amp; Composite PM's</li> <li>Treasuries higher in overnight trading as global equity markets sell-off and WTI oil drops towards $35/barrel; economic calendar includes trade balance, JOLTS job openings. </li> <li>The yen jumped to a 17-month high and government bonds climbed as increasing concern that global economic growth is faltering stoked demand for haven assets</li> <li>Three months after predicting Goldman Sachs Group Inc. would put the tumultuous end of 2015 behind it and stabilize profits, analysts are reversing course and cutting projections again</li> <li>Panama and the U.S. have at least one thing in common: Neither has agreed to new international standards to make it harder for tax evaders and money launderers to hide their money</li> <li>UBS and HSBC -- two of the banks hardest hit amid a U.S. crackdown on customers’ illicit funds in recent years -- are now starring in a torrent of leaked documents detailing how they once helped clients set up thousands of offshore shell companies</li> <li>China may approve as soon as this month a plan to make it easier for banks to convert soured debt into equity. The government may allow conversions of as much as 1 trillion yuan ($155 billion) of bad loans under the plan</li> <li>France is planning to join the Netherlands in taking steps toward greater transparency in the European Central Bank’s €80 billion-a-month ($91 billion) QE program, according to a person with direct knowledge of the plans</li> <li>Christine Lagarde said the International Monetary Fund will negotiate “in good faith” with the Greek government as she signaled that recent animosity over the latest review of Greece’s aid program will blow over</li> <li>Sovereign 10Y bond yields mostly lower; European and Asian equity markets drop; U.S. equity-index futures fall. WTI crude oil drops; gold and copper move higher</li> </ul> <p><strong>US Event Calendar</strong></p> <ul> <li>8:30am: Trade Balance, Feb., est -$46.2b (prior - $45.7b)</li> <li>9:45am: Markit US Services PMI, March F, est. 51.2 (prior 51) <ul> <li>Markit US Composite PMI, March F (prior 51.1)</li> </ul> </li> <li>10:00am: ISM Non-Mfg Composite, March, est. 54.2 (prior 53.4)</li> <li>10:00am: IBD/TIPP Economic Optimism, April, est. 47 (prior 46.8)</li> <li>10:00am: JOLTS Job Openings, Feb., est. 5.49m (prior 5.541m)</li> </ul> <p><strong>DB's Jim Reid concludes the overnight wrap</strong></p> <p>So with expectations for an output freeze from Oil producers at the Doha meeting later this month plummeting lower, away from that and the Fed/Data watch, another factor which will likely provide some near term direction for markets is Q1 earnings season in the US which is due to unofficially kick off next week when Alcoa reports on Monday. Our US equity strategists are expecting a difficult quarter for earnings and have a bottom up Q1 EPS growth decline estimate of -8% yoy, with markets exposed to banks and energy stocks in particular expected to perform poorly. Something we’ll be keeping a close eye on in coming weeks.</p> <p>Switching our attention over to the latest in Asia now where this morning we’re seeing most major bourses (aside from China) follow the lead from Wall Street last night and trade lower. Japanese equity markets in particular have seen the sharpest declines with the Nikkei currently -1.92%. A stronger Yen isn’t helping matters there while the latest numbers from the March Nikkei PMI data showed the composite falling below 50 last month for the first time in a year, tumbling 1.1pts to 49.9. The services data declined 1.2pts to 50.0 which was also the lowest in a year. Meanwhile, the Hang Seng (-1.40%) has also seen a steep fall after reopening from a public holiday yesterday, although bourses in China (Shanghai Comp +0.97%) are reversing course as we type from a softish start. We’re also seeing more Bloomberg headlines of another potential corporate default in Greater China this morning, with China Green Holdings the latest in the limelight after the company advised it has insufficient funds to make its upcoming bond repayment in a week. Elsewhere the Kospi is -0.80% and ASX -1.26%. The Aussie Dollar is a touch firmer after the RBA held rates steady as expected.</p> <p>Moving on. Yesterday’s batch of economic data in the US was generally a tad weaker than expected. The main focus was on the soft factory orders data for February. Headline orders were said to have declined -1.7% mom as expected however orders excluding transportation were down a heavier than expected -0.8% mom (vs. -0.5% expected). Meanwhile, core capex orders were confirmed as falling -2.5% mom in February which was slightly more than the initial flash reading had alluded to. Headline and core durable goods orders were down -3.0% mom and -1.3% mom having also been revised lower. Elsewhere we saw the labour market conditions index fall -2.1pts in March after expectations had been for a +1.5pts gain. That means the index has now put in its third consecutive monthly decline which is in contrast to the more positive picture that the headline nonfarm payrolls data is painting.</p> <p>Staying with the US, yesterday we heard from the usually dovish Boston Fed’s Rosengren who became the latest in a long line of regional Fed Presidents to speak with a more optimistic tone. Rosengren noted that in his opinion the current market expectations for one rate increase this year and next ‘could prove too pessimistic’. He highlighted that ‘the US economy is continuing to improve despite the headwinds from abroad’ and that ‘if my forecast is right, it may imply more increases in short-term interest rates than are currently priced into futures markets’ and that ‘it will likely be appropriate to resume the path of gradual tightening sooner’.</p> <p>There was also some Central Bank speak to note from the ECB too following comments from board member, Praet. In a speech in Rome, Praet made mention to the fact that ‘allowing inflation to re-anchor downwards comes with a high risk of credibility losses for the central bank, and especially when the objective is not being met’. Praet also noted that ‘the need for a superior policy mix is no excuse for central banks to be passive when their mandates are under threat’, before going on to state that ‘the ECB has demonstrated through its actions that it does not wait for others to move first’.</p> <p>The European data added little to the debate yesterday with the Euro area unemployment rate printing as expected at 10.3% in February, while the latest Sentix investor confidence reading showed a smaller than expected 0.2pt gain this month to 5.7 (vs. 7.0 expected). The Euro chopped around in small range yesterday before ultimately closing flat although we did see further moves lower for Bund yields, with the 10y at one stage trading as low as 0.115% which is only a smidgen away from the 0.101% intraday low this year made back in late February.</p> <p>Taking a look at the day ahead, we’ve got a slightly busier calendar to look forward to. This morning in Europe the early data is out of Germany where the February factory orders data is due. Shortly following this we will get the final revisions for the services and composite PMI’s in Europe (no change to the Euro area reading expected) as well as a first look for the indicators in Spain, Italy and the UK. Euro area retail sales covering the February month (0.0% mom expected) rounds off the data this morning. Over in the US this afternoon we kickstart with the February trade balance reading where expectations are for a modest widening in the deficit. We’ll then get confirmation of those PMI numbers before the closely watched ISM non-manufacturing print for March is due to be released (expected to tick up to 54.2 from 53.4 the prior month) where there will be a close watch on the employment component in particular. The IBD/TIPP economic optimism reading for April and February JOLTS job openings data concludes the releases. Away from the data we’re due to hear from the Fed’s Evans shortly after we go to print.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="880" height="495" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/sad%20trader%202.jpg?1459853834" /> </div> </div> </div><br clear='all'/><br/><br/><a href="http://rc.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/rc/1/rc.htm" rel="nofollow"><img src="http://rc.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/rc/1/rc.img" border="0"/></a><br/><br/><a href="http://rc.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/rc/2/rc.htm" rel="nofollow"><img src="http://rc.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/rc/2/rc.img" border="0"/></a><br/><br/><a href="http://rc.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/rc/3/rc.htm" rel="nofollow"><img src="http://rc.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/rc/3/rc.img" border="0"/></a><br/><br/><a href="http://da.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/a2.htm"><img src="http://da.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/a2.img" border="0"/></a><img width="1" height="1" src="http://pi.feedsportal.com/r/257412331071/u/49/f/645423/c/34894/s/4ebb29a7/sc/24/a2t.img" border="0"/><img width='1' height='1' src='http://zerohedge.feedsportal.com/c/34894/f/645423/s/4ebb29a7/sc/24/mf.gif' border='0'/><img src="http://feeds.feedburner.com/~r/zerohedge/feed/~4/pX6xrM10sIs" height="1" width="1" alt=""/>

http://feedproxy.google.com/~r/zerohedge...tory01.htm
Reply


Forum Jump:


Users browsing this thread: 1 Guest(s)