Market wrap futures slide despite latest central bank easing blitz zero hedge the millionaire mind pdf


Just like yesterday, it has – so far – been mostly about Asia in the overnight session, where as reported previously, we got the latest central bank engaging in an "unexpected" rate cut, after Reserve Bank of India Governor Rajan cut rates in an unscheduled move days after the government agreed for the first time to give the central bank a legal mandate to target inflation. This was India’s second rate cut in 2 months, and yet despite the Sensex surging to a all time high over 30,000, it subsequently ended up closing red on the day, down -0.7%, despite the Indian currency sliding 0.4% to 62.1463 to a dollar. Is the half-life of thany incremental rate cut in an unprecedented barage of global central bank easing now less than a day?

It wasn’t only India: next door in China, the PBOC increased the maximum amount of overnight and 7-day loans that its local branches can provide to financial institutions by 220 billion yuan.

Cumulative amount PBOC’s local branches can provide in overnight and 7-day loans is now 340b yuan, according to Bloomberg. Banks that meet “prudent” lending criteria set by the PBOC may obtain overnight loans at 4.5% and 7-day loans at 5.5%, in yet another gentle attempt to ease the monetary situatin and slow down the bursting of the domestic housing bubble.

Completely the Asia roundup, as Bloomberg’s Richard Breslow writes, the " news overnight from Asia adds more fuel to the question whether Asia is stalling, with Taiwanese IP weak and Australia’s slowing q/q growth putting a rate cut back on table." We would add how much longer can the dreaded global "D" word be avoided when it is clear that everyone but the Fed is now desperate to avoid deflation.

Shifting west, after opening in the green, European equities have swung between gains and losses, this follows on from negative closes out of the US and Asia with Services PMIs from around Europe and the UK coming out below expectation ( Eurozone Service PMI 53.7 vs. Exp. 53.9, Prev. 53.9 & UK Services PMI 56.7 vs Exp. 57.5, Prev. 57.2). On a sector specific basis, material names are underperforming in Europe after Fresnillio (-5.0%) reported negative earnings pre market current exchange rate usd to cad. Weakness in equities has seen Bunds and USTs recover from earlier position squaring ahead of upcoming key risk events, namely ADP today, ECB rate decision on Thursday and NFP on Friday.

In FX markets, the USD index printed fresh 11 year highs after breaking out of its tight overnight range and through 95.5 to the upside, while resistance could come in the form of the 50% retracement from the 2001 high to the 2008 low at 95.859. The strength seen in the greenback weighed on both EUR/USD and GBP/USD, with the EUR reaching an 11 year low, while both EUR and GBP have seen weakness after the aforementioned Services PMI readings.

Elsewhere, NZD/USD trades at session highs amid no fundamental news after breaking through its 50DMA of 0.7572 to the upside and above yesterday’s highs. Meanwhile, ahead of today’s BoC rate decisions, CAD has weakened, with the move attributed to USD strength as the central bank are expected by most surveyed analysts to keep rates on hold. During Asia hours, RBI unexpectedly cut its Repo and Reverse Repo rates by 25bps to 7.5% and 6.5% respectively, with Goldman Sachs bringing forward expectations of possible rate cut by the Indian central bank from April by a month.

WTI crude futures resides in positive territory to outperform Brent heading into the NYMEX pit open after yesterday’s API inventory showed a build of 2900k, substantially less than last week’s 8900k build. This comes ahead of DoE inventories today, expected at 3950k (Prev. 8427k), while comments from Saudi oil minister Al-Naimi had no effect on markets, failing to add any new rhetoric. NatGas outperforms in the energy complex as a consequence of cold weather in the US. Finally in terms of the metals complex, gold has traded mildly higher overnight, coming off its best levels heading into the North American cross over, with the safe-haven supported amid a bout of weakness seen across global equity markets.

In Summary: European shares stay lower, close to intraday lows, with the basic resources and chemicals sectors underperforming and autos, telco outperforming dollar vs euro chart. Euro-area composite PMI, U.K. services PMI below estimates. U.K. wins court ruling on ECB policy on Euro clearinghouses. India cuts interest rate in surprise move. Obama extends sanctions against Russian officials over Ukraine. The Swedish and Spanish markets are the worst-performing larger bourses, the Swiss the best. The euro is weaker against the dollar. Japanese 10yr bond yields rise; German yields increase dollar exchange rate today. Commodities decline, with wheat, soybeans underperforming and natural gas outperforming. U.S. ISM non-manufacturing, mortgage applications, ADP employment change, Markit U.S. composite PMI, Markit U.S. services PMI, due later.

• Looking ahead, this afternoon sees US ADP Employment Change, Services PMI, ISM Non-Manf. Composite and DoE Crude oil Inventories, as well as the BoC rate decision and a host of Fed speakers

• Treasuries steady before ADP Employment, est. +219 vs +213 in Jan.; U.S./Germany 10Y spread near widest since May 1989 before Draghi’s expected release of QE details at tomorrow’s ECB meeting.

• Reserve Bank of India Governor Rajan cut rates in an unscheduled move days after the government agreed for the first time to give the central bank a legal mandate to target inflation

• Britain scored a rare victory in its bid to challenge EU powers over the City of London as EU judges sided with the U.K. in a clash with the European Central Bank on clearinghouses

• Yellen, countering criticism from members of Congress, said the Fed is trying to avoid being too cozy with the Wall Street firms it supervises and wants to ensure that regulators aren’t afraid to confront the financial industry

• RBS may cut more than 2/3 of its investment-bank jobs as part of a plan to shrink the securities unit and focus on the U.K. consumer market, a person with knowledge of the matter said

• U.K. Conservatives led in a third straight poll of voting intentions as their coalition partners, the Liberal Democrats, sank to a 25-year low with just over two months to go until the general election

This week hasn’t really got going yet but it’s set to liven up today and as we move towards the weekend. ADP employment data and the Greek T-bill auction are the main events before we see the China National People’s Congress meeting tomorrow along with the ECB meeting and then payrolls on Friday. As we write this the Indian central bank has added to the list of surprise rate cuts this year with only 3 out of 15 polled on Bloomberg expecting the move usd currency. More on this later.

As mentioned the Greek T-Bill auction will be worth keeping an eye on today. The nation has a €1.4bn maturity due on Friday along with a €300m repayment due to the IMF. DB’s George Saravelos noted that the portion of the bill held by foreigners (c. €800m) may be unwilling to roll over and so potentially raise the risk that the auction does not generate the necessary amount to cover Friday’s maturity. This, combined with reluctance by the ECB to raise the cap on T-Bill issuance, will likely place the government under considerable near term pressure. It’s likely that we hear the first request from the Greek government to the ECB to increase the T-Bill issuance cap at the Eurogroup meeting next Monday. However it remains to been seen whether or not the ECB is willing to comply and instead we heard earlier suggestions from the EC’s Dijsselbloem that Europe may be willing to allow for an early disbursement of the final tranche should conditions be agreed upon usd to zloty. On this, Greek press Ekathimerini reported yesterday that finance minister Varoufakis is due to present a collection of six reform proposals to Eurogroup ministers on Monday. The report also claims that Varoufakis is likely to be prepared to discuss what privatizations the government is willing to carry out with suggestions that he is in favour of further private investment at the Piraeus Port and in the Greek railway. This appears to conflict with comments from other Greek government officials however with the state minister in particular saying that the coalition would not consider selling Greece’s water or electricity assets.

Recapping the market moves yesterday, it was a relatively subdued day on the whole culminating in equity markets in the US retreating from recent highs. The S&P 500 finished -0.45% at the close. Aside from a better day for energy stocks (+0.23%) following gains for WTI (+1.88%) and Brent (+2.49%) – which in turn appeared to rise on geopolitical concerns in Libya – losses were generally broad based across sectors. In terms of data, readings on the whole were largely mixed. The IBD/TIPP Economic Optimism index for March rose 1.6pts to 49.1 (vs. 47.8 expected) and the lesser-followed ISM NY firmed over 18pts to 63.1 1 usd in inr. Vehicle sales disappointed however. The 16.16m saar for February was down versus both consensus (16.7m) and also from the January reading (16.56m). Treasury yields rose for the second consecutive day meanwhile. Both 10y (+3.7bps) and 2y (+1.6bps) yields climbed to 2.119% and 0.678% respectively. The latter is in fact now at its highs in yield for the year usd today. Elsewhere, the Dollar was largely unchanged.

It was a day of rising bond yields in Europe also yesterday. Indeed, 10y benchmark yields in Germany (+0.7bps) and France (+3.0bps) both rose whilst peripherals fared little better with yields 4-6bps wider generally. With newsflow relatively light yesterday, the market appears to be in something of a wait and see mode ahead of the ECB this Thursday. Macro data was also relatively light, however retail sales out of Germany provided something for the market to digest. The +5.3% print was in fact up half a percent from the December print and also came in well ahead of expectations of +3.0%. The reading was also the highest since June 2010 and marked a fourth consecutive monthly increase which has only happened four times since 1994. Despite a modest rise in Bund yields yesterday, the yield curve is still trading in negative territory up until the 6-year bucket which is in stark contrast to the relatively solid macro data releases we’ve seen out of the nation of late. Elsewhere, PPI for the Euro-area continues to be subdued with the -3.4% yoy reading below market (-3.0% yoy).

Yesterday’s data did little to help equity markets in Europe with the Stoxx 600 in particular extending its weaker start to March closing -0.92% and led by Banks (-1.55%) and Autos (-2.08%) in particular. Credit markets on the other hand closed a touch firmer with Xover tightening 2bps. In fact primary markets appeared to be the one area of decent appetite yesterday. Interestingly, in Europe the Icelandic Bank Arion issued the first bond by an Icelandic bank in Euro’s since the collapse of its domestic banking sector wyndham travel agent rates. The 3-year senior bonds were priced at a yield of 3.24%. In fact glancing across peripheral bank debt, similar maturity senior Bank of Ireland bonds are trading at 1.1% and Monte dei Paschi bonds are 2.2%, which is of course in stark contrast to their counterparts in Greece where 2-year senior Piraeus Bank debt is trading north of 15%. Elsewhere, the other headline in credit markets yesterday centered around the record bond sale by US drug-maker Actavis (BBB- rated). The $21bn of bonds sold by the corporate yesterday as part of its M&A financing was in fact the second largest corporate debt raising ever. Clearly there was little issue around appetite for the deal with Bloomberg reporting that there was around $90bn of orders across the structure.

Just wrapping up yesterday’s news, Ukraine was of some attention yesterday following the news that the nation’s Central Bank raised its main benchmark rate by 10.5% to 30% – the highest benchmark rate globally. The rate is in fact up from 14% just a month ago and 6.5% this time last year ringgit usd exchange rate. Governor Gontareva was reported on Bloomberg saying that the move was to ‘stabilize the situation on the money and lending markets’ with the nation suffering from rising inflationary issues (+28.5% yoy as of January) and a depreciating currency. The move appeared to provide some support to the Ukrainian Hryvnia, with the currency bouncing 8.5% versus the Dollar

Taking a look at the early morning trading in Asia, bourses are generally following the US lead and trading lower as we type binary message. The Nikkei (-0.64%), Shanghai Comp (-0.17%) and Hang Seng (-0.31%) in particular are weaker. The exception is in India where the Nifty (+0.83%) and Sensex (+0.99%) are sharply higher after the surprise rate cut by the Reserve Bank of India. The Central Bank has cut the benchmark repurchase rate by 25bps cut 7.5%, marking the second easing this year.

In terms of today’s calendar, as mentioned focus this morning in Europe will be on the Greek t-bill auction whilst away from that attention will be on the PMI readings where we get the final February services and composite prints for the Euro-area, Germany and France as well as the first readings for Italy, Spain and the UK. Also due up this morning are retail sales for the Euro-area. This afternoon in the US, as well as well the ADP employment reading we get the final services and composite PMI readings as well as the ISM non-manufacturing reading and the release of the Fed Beige Book. So it does feel the week will heat up a little after a dullish start.

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