The #OccupyWallStreet crowd has shifted over to the heart of tourist New York (where no actual New Yorker has set foot.. probably ever) - Times Square. Follow the action live with this convenient live feed.
The Biggest Market Headfake Ever: Is A Wholesale French Bank Liquidity Run The Sole Reason For The Euro, And S&P, Surge?Over the past two weeks, there is one simple thing that has been bugging skeptical macro observers: namely the paradox of i) just how ugly the European funding and liquidity situations have gotten, on the one hand, confirmed by the blow out in French bond yields (the French-Bund 10 year spread just hit an all time record yesterday) as well as continuing deterioration in credit spreads across core European nations, yet, on the other, ii) the euro, especially in that critical pair the EURUSD, has seen one of its most explosive rises in recent history, which as Zero Hedge pointed out yesterday, has totally decorrelated with the French-Bund spread, to which it had been firmly 'pegged' previously. As a result of ii), equity markets have surged due to legacy correlation arbs, which see Euro strength, and hence dollar weakness, as an empirical signal of equity "cheapness", which in turn leads all algos to treat a rise in the EURUSD as a buying signal. So how is it that even with the interbank liquidity situation in Europe frozen and getting worse, further keeping in mind that European banks are now expected to (or have already commenced - see yesterday's move in PrimeX) engage in widespread asset liquidations, that broad market risk is perceived as cheap? Simple. As the following note by Deutsche Bank's Alan Ruskin explains, the sole reason for the EUR (and hence S&P and global 100% correlated equity risk) surge in the past 9 days is not driven by any latent "optimism" that Europe will fix itself, but simply due to the previously discussed wholesale asset liquidations (as none other than the FT already noted), which on the margin are explicitly EUR positive due to FX repatriation, courtesy of the post-sale conversion of USDs to EURs. Which means that the ever so gullible equity market has just experienced one of the biggest headfakes in history, and has misinterpreted a pervasive European, though mostly French, scramble to procure liquidity at any cost by dumping various USD-denominated assets, as a risk on signal!
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Not saying anything, but wink wink nudge nudge. Because you know when dealers need to hedge massive cash exposure in suddenly mispriced commercial real estate (oh, look, it's a Chinese fighter jet, it's the stock price of Morgan Stanley, it's a REIT) the one place they all go to next is... And there is nothing like some concerted selling in a brand spanking new product in which the entire dealer community is long.
Submitted by cpowell on Sat, 2011-10-15 23:59. Section: Daily Dispatches Would they really announce any buying in advance and thereby drive up the price they'd have to pay? Or would they deny interest until they got their metal? See:
Stocks Rise On Gain In Retail Sales; Google Jumps
California Revenues Down By $705M
The Depression: If Only Things Were That Good