Comment by phil

View Single Comment

phil
February 11th, 2016 at 5:30 am

Wow, Europe completely collapsed at the open – down 3-4%!





Nikkei blew stops at 15,500 but back in now at 15,100, playing for a bounce (/NKD) and hoping to get something back.  It's matching 15,500 now on the Dow (/YM) so hopefully that provides some bounce.





I guess we're getting that panic flush we were hoping for….

















I'm not sure 15,500 will even hold but all stopping out if that and 940 on the Russell and 1,800 (can you believe it) on /ES and 3,870 on /NQ can't hold and we'll watch 8,700 on the DAX but it would take a huge reversal at this point just to make a weak bounce so be VERY CAREFUL with any long play.  

We already know Hong Kong got off to a bad start but their 4% drop reflected catching up to the World after being closed all week – it wasn't, in and of itself a reason to panic.

Hong Kong's Year of the Monkey Starts With an Equity Rout: Chart



The immediate catalyst for the sell-off was Sweden's Riksbank cutting rates from -0.35% to -0.5% AND saying they were "ready to do more" AND saying they were "analysing whether it is possible to implement other measures to underpin repo rate cuts.”

The central bank said in a statement:

The economy continues to strengthen but inflation is expected to be lower during 2016 than previously forecast. The period of low inflation will therefore be longer. This increases the risk of weakening confidence in the inflation target and of inflation not rising towards the target as expected.

There is still a high level of preparedness to make monetary policy even more expansionary if this is needed to safeguard the inflation target.

It has also taken a big red pen to its inflation forecasts.



Once again, the central bank reminded traders of its readiness to intervene in the currency markets without further notice, if it feels the need. As it has said on many occasions, the Riksbank sees a weaker krona as a key way to achieve higher inflation. market participants, however, think the currency is a bargain.

In another familiar refrain, the central bank also once again called on regulators to take action to control rising levels of Swedish household debt, saying

If no measures are taken, this, in combination with the low interest rate level, will further increase the risks. Such a development could ultimately be very costly for the national economy.

The market panic is over the impression that the same could be said for all of Europe and this is a foreshadow of things to come.  Morgan Stanley also spooked people on the same subject on Monday so now their doom and gloom scenario looks like it's playing out.   Also, the OECD warned against negative rates only yesterday. 

This is a really outsized reaction to Sweden's monetary policy, of course (good summary here) but you don't want to get in the way of a panic so very tight stops on index longs!  

That sent the Yen 2% higher and really killed the Nikkei but little effect on the Dollar (95.50) or the Euro ($1.135) and Pound ($1.446).

Oil is down to $26.50 after a failed attempt at $27.50 and that's a bad technical failure for them.  Brent testing $30 and that SHOULD be bouncy.







At least /NG is moving up!   And, of course, panic into gold and silver while copper tests our long line at $2 (/HG), but you have to have a cast-iron stomach to play it today!  







More Yellen testimony later today but she certainly didn't help things yesterday, so don't expect much:

Thursday's economic calendar

• 8:30 Initial Jobless Claims
• 9:45 Bloomberg Consumer Comfort Index
• 10:00Yellen delivers semi-annual monetary policy testimony
• 10:30 EIA Natural Gas Inventory
• 1:00 PM Results of $16B, 30-Year Note Auction
• 4:30 PM Money Supply
• 4:30 PM Fed Balance Sheet

Of course, it's a huge coincidence that we tend to be down on 30-year auction days, which scares investors into long-term notes at low rates and makes it look like there's a natural demand at these prices.  Just a coincidence, I'm sure.  Fortunately, there's not another one until March 10th.  

Yen Advances With Gold as Hong Kong Stocks Decline; Oil Slides. Japan’s yen gained with gold after Janet Yellen said the Federal Reserve may delay policy tightening if the turmoil in financial markets continues. Stocks in Hong Kong slumped fter a three-day trading break, while crude oil extended its rout. The yen climbed for a fourth day as a Bloomberg gauge of dollar strength traded near its lowest level since November. 

Fasten Your Seatbelts": Kyle Bass Previews The Collapse Of China's $34 Trillion Banking Sector

China Turns a Glut of Oil Into a Flood of Diesel Swamping Asia. Fuel producers from India to South Korea are finding that rising refined products from China are cutting the profit margins they’ve enjoyed from cheap oil to the lowest in more than a year. Worse may be coming. China’s total net exports of oil products — a measure that strips out imports — will rise 31 percent this year to 25 million metric tons, China National Petroleum Corp., the country’s biggest energy company, said in its annual research report last month. That comes after diesel exports jumped almost 75 percent last year.

Agency Bond Rigging Probe Expands As Europe Grills Banks On SSA Debt

 

European earnings roundup

• Nokia (NYSE:NOK) posted better-than-expected profits, but warned of an impending slowdown in the telecom-equipment sector.
• Total's (NYSE:TOT) net loss narrowed in the fourth quarter after it booked fewer write-downs than a year earlier, while announcing plans to accelerate spending cuts.
• Citing a worsening global economy and sharp downturn in commodity prices, Rio Tinto (NYSE:RIO) swung to an annual loss and scrapped its progressive dividend policy.
• Societe Generale (OTCPK:SCGLY) reported fourth-quarter profit that missed analyst forecasts on investment bank woes and provisions for potential legal costs.
• Adidas (OTCQX:ADDYY) raised its outlook for the second time in four months after exceeding its revenue and profit targets for 2015.
• Although it plans to turn around its unprofitable general insurance unit, Zurich Insurance (OTCQX:ZURVY) disclosed a worse-than-expected loss in Q4.

 

Could the Stock Market Cause a Recession

Some Hedge Funds Want to Make Subprime Auto Loans Next Big Short

Tesla Releases Steaming Pile Of Epic "Non-GAAP" Gobbledygook; Stops Reporting Free Cash Flow; Stock Soars