Wednesday, February 10, 2016

Deutsche Bank Spikes Most In 5 Years (Just Like Lehman Did)

Rumors of ECB monetization (which would be highly problematic in the new "bail-in" world) and old news of the emergency debt-buyback plan have sparked an epic ramp in Deutsche Bank's stock this morning (+11% - the most since Oct 2011). This extreme volatility is, however, eerily reminiscent of 2007/8 when headline hockey sparked pumps and dumps on a daily basis in Lehman stock... until it was all over.

Market Angry About Yellen's "Is NIRP Legal" Confusion

Just as we detailed last week, and it appears Rep. Hensarling has been reading, when pressed on The Fed's legal authority to take interest rates negative, Janet Yellen gushed that "Fed authority for negative rates is still a question." This appears to have been taken as bad news by the market (cutting off the potential easing paths of the future in a world of NIRP), and stocks, crude, USDJPY have all tumbled.

Chris Christie To Suspend Presidential Campaign; Needs "Deep Breath"

After finishing sixth in the key New Hampshire primary, New Jersey governor Chris Christie is set to bow out of the race for the White House. "We’ve decided that we’re going to go home to New Jersey tomorrow and we’re going to take a deep breath and see what the final results are tonight because that matters," he said.


John Mack: Don't Worry About Deutsche Bank, It Will Be Bailed Out By The Government

It was illuminating, if not surprising, that during an interview with Bloomberg TV discussing the future of Deutsche Bank, John Mack said that "there’s no question in my mind, it is absolutely good for every penny." In other words, "Deutsche Bank is fine." Why is he so confident? According to Mack, "this idea that I heard yesterday, the possibility of not making their interest payments, it’s just absurd. The government will not let that happen."

Janet Yellen's "Humphrey-Hawkins" Testimony: Economic Strains, Tightening Pains, & No Stock Gains - Live Feed

Fed Chair Yellen will be presenting her semi-annual monetary policy testimony - sometimes called the "Humphrey-Hawkins" testimony - today (House Financial Services Committee) and tomorrow (Senate Banking Committee). Her prepared remarks offered little new information over the January FOMC Statement but the Q&A will likely be the most market-moving as politicians likely demand she "get back to work" for the good of the nation's shareholders.

Oil Pumps On Unexpected Crude Inventory Draw, Dumps On Building Storage Concerns

Following last night's across the board build in inventories from API, DOE reported a surprising 750k drawdown (much less than the 3.2mm build expected). However, across the rest of the complex - inventories rose: Cushing +523 build (13th week in a row), Gasoline +1.26mm build, and Distillates +1.28mm build (first in 4 weeks). Having tumbled early on from Yellen's undovishness, crude spiked on the headline draw (back above $29) but is struggling to hold gains.

Goldman's Take: "Additional Hikes Remain FOMC Baseline"

"BOTTOM LINE: Chair Yellen’s prepared remarks to the House Financial Services Committee contained little new information on the monetary policy outlook, and were roughly in line with comments made by Vice Chair Fischer and New York Fed President Dudley over the past couple weeks. She continued to highlight the FOMC’s expectation for “gradual” increases in the federal funds rate."

The End Is Nigh For Europe As Officials Mull 2 Year Schengen "Suspension"

Like a stock halted limit down on the Shenzhen, there's a very good chance that once suspended, Schengen will never again be open for "trading".

JPM's Striking Forecast: ECB Could Cut Rates To -4.5%; BOJ To -3.45%; Fed To -1.3%

JPM estimates that if the ECB just focused on reserves equivalent to 2% of gross domestic product it could slice the rate it charges on bank deposits to minus 4.5%. In Japan, JPM calculates that the BOJ could go as low as -3.45% while Sweden’s is likely -3.27%. Finally, if and when the Fed joins the monetary twilight race, it could cut to -1.3% and the Bank of England to -2.69%.

Fed Reveals Which "Financial Stability Developments" It Is Most Worried About

Broad equity indexes have declined significantly since July 2015, and forward price-to-earnings ratios have fallen to a level closer to their averages of the past three decades.
Leverage [among speculative-grade and unrated firms] firms has risen to historical highs, especially among those in the oil industry, a development that points to somewhat elevated risks of distress for some business borrowers.

BP's Stunning Warning: "Every Oil Storage Tank Will Be Full In A Few Months"

"We are very bearish for the first half of the year. In the second half, every tank and swimming pool in the world is going to fill."

Intraday Trading Indicator Showing Shades Of 2000, 2007 Tops

"Smart Money" flow is shifting in a disturbingly similar pattern to those seen at the prior 2 cyclical tops...

Hilsenrath: Yellen's Comments Have A "Downbeat Undertone"

The only question that matters today: is a "downbeat undertone", aka bad news, good news for stocks once again, and will the market relapse to its old "bad news is great news" regime, or will it take advantage of today's brief European bank euphoria to sell the rally as it has throughout all of 2016?

WTI Crude Plunges Back Below $28 After Yellen Disappoints

WTI Crude futures are tumbling as Yellen's prepared remarks offered little for the doves and played down growth due to "financial strains." Back in the red after some overnight hope from Europe, WTI is back to a $27 handle once again...

Yellen Hints At Slowing Economy, Dropping Stocks, Accommodative Fed, But Does Not Go "Full Dove"

With world markets begging for moar, Janet Yellen's prepared Humphrey-Hawkins Testimony was a disappointment:
The bottom line this is simply a rerhash of the Jan FOMC Statement and does not offer enouigh dovishness for the market.

Profit At World's Largest Shipping Company Plunges On Collapsing Global Trade, Sinking Crude Prices

Back in November, Nils Smedegaard Andersen, CEO of Maersk, the world’s largest shipping company, gave the world a reality check when it comes to global growth and trade. “The world’s economy is growing at a slower pace than the International Monetary Fund and other large forecasters are predicting” Andersen told Bloomberg. On Wednesday, we got a look at how the challenging environment affected Maersk's bottom line in 2015. The picture wasn't pretty.

European Banks Soar On Rumor ECB May Monetize Bank Stocks; Japan Crash Continues

While algos patiently await the only thing that matters for US stocks today which is Janet Yellen's testimony before Congress. expected to be released at 8:30 am (and previewed here), the rest of the world this morning is a hot mess of schizophrenic highs and lows.

"Investors Have Completely Lost Faith In Deutsche Bank" A Top 10 Shareholder Admits

After a day of "rock solid" Lehman-isms, emergency bond buyback plans, and a stock price still unable to close green, Deutsche Bank is on the ropes (despite CNBC proclaiming that "it doesn't feel like a Lehman moment.") However, as dawn breaks across the motherland, something more insidious is breaking for Germany's largest bank. Deutsche faces an uphill task rescuing its stock from record lows, especially, as Reuters reports, a top 10 shareholder exclaims "investors have completely lost faith in the bank," and a fast recovery from this crisis was unlikely.

A 918 Point Stock Market Crash In Japan And Deutsche Bank Denies That It Is About To Collapse

by Michael Snyder, The Economic Collapse Blog:

On Tuesday junk bonds continued to crash, the price of oil briefly dipped below 28 dollars a barrel, Deutsche Bank was forced to deny that it is on the verge of collapse, but the biggest news was what happened in Japan.  The Nikkei was down a staggering 918 points, but that stock crash made very few headlines in the western world.  If the Dow had crashed 918 points today, that would have been the largest single day point crash in all of U.S. history.  So what just happened in Japan is a really big deal.  The Nikkei is now down 23.1 percent from the peak of the market, and that places it solidly in bear market territory.  Overall, a total of 16.5 trillion dollars of global stock market wealth has been wiped out since the middle of 2015.  As I stated yesterday, this is what a global financial crisis looks like.
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Economics Professor: Negative Interest Rates Aimed at Driving Small Banks Out of Business and Eliminating Cash

from Washington’s Blog:

More than one-fifth of the world’s total GDP is in countries which have imposed negative interest rates, including Japan, the EU, Denmark, Switzerland and Sweden.
Negative interest rates are spreading worldwide.
And yet negative interest rates – supposed to help economies recover – haven’t prevented Japan and Europe’s economies from absolutely tanking.
Nor have they even stimulated spending. As ValueWalk points out:
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White House pushes ahead with plan to slash pensions for up to one million retirees

from WSWS:

The Obama administration is pushing ahead with its plans to slash pension benefits for up to one million participants in “underfunded” multiemployer pension funds as part of its drive to make defined-benefit pensions a thing of the past for all US workers.
The White House campaign, carried out in a conspiracy with the major trade unions and multinational corporations, takes place in the wake of the 2013–2014 bankruptcy of Detroit, which set a precedent for slashing the legally protected pension benefits of retirees.
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Whiff of Panic? Global Bear-Market Progress Report

from Wolf Street:

Watch the banks.
For once, aggrieved investors can’t blame China. Markets in China are closed for the New Year’s holidays.
After a very ugly week, we expected stock markets to rise this week on the simple principle that nothing goes to heck in a straight line. But we’ve been wrong on this before, and that line could be straighter than we’d expect. So, the US and Europe are starting out the week with a rout.
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WMD – Weapons of Mass Destruction

by Gary Christenson, Deviant Investor:

“WMD” also is “Wasteful Monetary Devastation.”
WASTEFUL:  We all know that governments spend money in wasteful ways and compensate with higher taxes, deficits, huge debt, “printed currencies” and inflation.  “Bridges to nowhere,” various wars, and “giveaways” benefit a few at the expense of many.
MONETARY:  Printing and digitally creating many trillions of dollars, euros, yen, or pounds may temporarily bail out banks and governments but in the big picture they destroy capital and weaken the economies of the nations which are deluding themselves.
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