Macro Afternoon

Outside China, Asian stocks have not fared well today as profit taking and risk aversion following the moves in the bond markets remains the key strategy. Yen backed off slightly against USD but is still sought after as a safe haven while Aussie bond yields spiked another four points higher to a new high.

In mainland China the Shanghai Composite has closed up a few points higher to remain above 3400 points at 3424 as its uptrend firms.  The Hang Seng Index is following a similar path with a scratch session today remaining just above 31000 points, but this trend is waning:

S&P futures are inching up slightly despite the poor showing in Asia, wanting to get back above the next level of resistance at the 2750 level:

Japanese stocks fell despite a small blip lower in Yen with the Nikkei 225 down 0.3% to 23710 points. The USDJPY pair bounced off modest support at the 111.20 level but this may be shortlived and just an overshoot response:

The ASX200 was the worst of the bunch, down 0.5% to 6067 points, again in perfect sync with the major bank stocks which all fell a similar amount. Not a good start to 2018!

The Aussie dollar however is pipping higher on the back of the retail trade figures, making a new high for the week and indeed passing last week’s session highs to be at 78.75 going into the London session. This is looking more promising:

The economic calendar lights up tonight with the final German GDP print followed by the ECB minutes. In the US its the weekly initial jobless claims numbers plus the monthly budget report.

Comments

  1. The global bond rout has begun, leaving equities on borrowed time … AEP … UK Telegraph (behind paywall)

    http://www.telegraph.co.uk/business/2018/01/10/global-bond-rout-has-begun-leaving-equities-borrowed-time/

    Each supercycle for bonds over the last two centuries has lasted the span of a career. The tide is immensely powerful. When it finally turns, the world economic system faces nothing less than a regime change.

    The current ‘ice age’ – to borrow from Albert Edwards at Societe Generale – began in 1981 when the US Federal Reserve delivered a crushing monetary shock and defeated the Great Inflation.

    Benchmark US yields have been falling in a staggered fashion ever since, drawn lower by the deflationary forces of the internet and a vast pool of cheap labour after China and Eastern Europe joined the global economy in the Nineties. … read more via hyperlink above … behind paywall …

    • They are like cargo cultists aren’t they…they keep coming back to the same place expecting something that happened in the past to happen again. The economy just isn’t strong enough………..finance is not production.

      http://www.alhambrapartners.com/2018/01/10/no-no-this-2-is-different-from-all-those-others/

      Even if the Feds oil traders can spike inflation for a while US consumers are broke and will soon cut back spending.

      http://peakoilbarrel.com/wp-content/uploads/2017/09/615943-1.jpg

      I can’t see anything that will stop the US from having negative interest rates in the next recession………it is all about the debt.

      • Agree. Maybe a short term dead cat bounce but lower to go. When you borrow 30+ years from the future the future finally arrives expecting repayment. And it’s not going to let you do it with inflated money.

      • Per MMT, we don’t pay back the past with future stuff, time travel is currently and into the foreseeable future an impossibility.

        Now I know some want to imbue fiat with hard currency attributes, but, that is an observer problem more so that an accurate observation. Baaad case of observer preference over system function imo.

        disheveled… the grouping of shared bias is another tell…

  2. January 10th @ 9:58PM {AEST}
    Wally comments : Macrobusiness.com.au/2018/01/macro-afternoon-338/

    It will be seen I advised – in another one of my seminal pieces for MB – to take action consistent with the
    (characteristically brilliant contrary) view that world equity, and commodity, markets are peaking.

    The linkages from there are as follows:
    1) The significant players are continuously looking out for my work ;
    2) My above-referenced MB comments have the Funky hallmarks;
    3) So, given the huge potential rewards, they seek to verify it comes from me; a huge amount of energy is expensed in mining to validate the authenticity of the actual author … eventually discovering the hash;
    4) Then, in an undoubtedly resultant sequence:
    i) Euro shares fall by up to .78%, as in the case of Germany’s DAX;
    ii) All the major American indices decline … all of them
    [ refer my recommendation d) in the above Jan 10th MB link ]
    iii) All the major Asian markets go into reverse today
    iv) XJO breaks down by 0.50%
    [refer my recommendation d) in the above Jan 10th MB link ]
    v) BHP, Rio, WPL + FMG fall
    [ refer my MB 10th Jan a),b), c) prophecies ]
    vi) Crude Oil tops out.
    [ refer my recommendation d) in the above Jan 10th MB link ]

    Should MB be paying me ??

    .

    PS …. for you, Wilbur – my good mate ….. check today’s Becker post : “ Oil is about to fall on mis-matched supply and demand “

      • Hey, Hardon … how are you … been quiet you have … missed you … yes, I know, I’m so good on the markets ?
        Thanks for the interest in my health, Richard [ why Richard, I hear you ask: well, what is “Richard” also called sometimes, as in a four-letter-word, that starts with a “d” , and ends in a “k”, and has the letters “I”, and “c” in-between ]

      • See my great contributions/explanations/prophecies yesterday afternoon? … yes, I know, you have become an admirer – can’t help yourgoodself.

      • Hardon … have you seen what is said about me in the Becker post I refer Wilbur too ? Anyone ever pay you a similar compliment ?

        Too hot – can kiss myself, so pretty.

      • This is what I’m talking about, Maggot. You got no chill. I leave you for 10 seconds and you’ve spammed reply after reply of nonsensical dribble. Take a breath, collect your thoughts and at least try to string a sentence together that doesn’t require an AI algorithm to crack it.

        I’m really happy for you though. A tidy 10% return? You must be stoked. Becker throwing some love your way too? Great, just great, mate. Things are really starting to turn around for you 😊👍🏻

  3. So is this hyperventilating or are we about to be conned – again?

    A former principal researcher at bank regulator APRA has revealed in a submission to a Senate inquiry that, contrary to government reassurances, AUSTRALIAN BANK DEPOSITS ARE NOT GUARANTEES.
    This explosive revelation shreds the government’s repeated assurances that its new bill to give crisis resolution powers to the Australian Prudential Regulation Authority (APRA) will not allow the “bail-in” (confiscation) of bank deposits, because they are guaranteed up to $250,000 by the Financial Claims Scheme (FCS).
    In the cover letter to his submission to the Senate Economics Legislation Committee’s inquiry into the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017, Dr Wilson Sy asks Committee chair Senator Jane Hume: “As a matter of urgency, I need to ask: are you prepared to have your savings in bank deposits confiscated to save insolvent banks? What about the millions of voters you represent? How would they react if you allow this to happen to them?”
    Dr Sy charges that the bill “gives the Government and APRA new discretionary powers to confiscate bank deposits”, and that it should be rejected.

    As a Principal Researcher at APRA in 2004-10, during which time he was briefly acting Head of Research for a time, Dr Sy is one of the most qualified people to comment on APRA and the powers it will be given by this bill. Both the 2008 global financial crisis and introduction of the Financial Claims Scheme occurred while he was at APRA.

    FCS bank guarantee not activated!
    The essential point that Dr Sy makes is that the FCS is not an absolute guarantee. He quotes the FCS website, which makes clear that the FCS will only take effect if the government activates it when an ADI (Authorised Deposit-taking Institution—a bank, credit union, building society etc.) fails. “That is, when a bank fails, i.e. becomes insolvent, the Australian Government or APRA then has the discretion to decide whether or not to activate the FCS”, he says. “Hence, it should be emphasised that:
    “Bank deposits are not protected or guaranteed at all.”
    Under the Banking Act 1959, Dr Sy explains, APRA is responsible for two potentially conflicting objectives: the protection of depositors AND the promotion of financial stability. This depositor protection is “illusory”, he asserts, because the Banking Act doesn’t state which objective has priority.
    Under the new bill, however, APRA will have the discretionary power to decide which objective has priority; alarmingly, it will be able to make such a decision “in secrecy”. Dr Sy references Subdivision D, Section 11CH (p.24) of the bill, which states that APRA may decide that its orders must be kept secret if it is “necessary to protect the depositors of any ADI OR to promote financial system stability”. (Emphasis added by Sy.) The replacement of “AND” with “OR” confirms that the objectives are in potential conflict. “Therefore”, Dr Sy continued, “it is important to recognise that the Bill allows APRA discretionary powers to decide secretly whether to protect depositors or to promote financial system stability.”
    Quoting a 2012 Reserve Bank of Australia paper, which stated that the priority of regulators, mandated under Commonwealth legislation, is to “pursue financial stability”, Dr Sy concludes:
    “Therefore, the evidence collected here strongly suggests that the Bill is designed to confiscate bank deposits to ‘bail in’ insolvent banks to save the financial system.”

    Can’t be funded!
    Dr Sy’s revelation is further, damning evidence that the FCS is not a real guarantee. The Citizens Electoral Council had already exposed in 2014 that, by the regulators’ own admission, the FCS doesn’t have the money to guarantee deposits in any of the Big Four banks, which hold 80 per cent of all deposits! This was first acknowledged in a 19 June 2009 meeting of Australia’s Council of Financial Regulators, comprising APRA, ASIC and the Reserve Bank, which noted in its minutes that a failure of one of the Big Four banks would “exceed the scheme’s resources”. Later, the Financial Stability Board in Basel, Switzerland, which is in charge of imposing a bail-in regime worldwide, noted in its 21 September 2011 “Peer Review of Australia” that the government’s $20 billion provision per bank “would not be sufficient to cover the protected deposits of any of the four major banks”, which each have more than $400 billion in deposits.
    Defeat the APRA bill
    Most members of parliament are assuring their constituents that the APRA bill—which virtually none would have read—does not mean deposits will be able to be bailed in, because deposits are guaranteed under the FCS. Dr Sy’s revelation explodes that myth. This is not an academic question. With all signs pointing to a near-term collapse of the so-called “everything bubble” comprising property markets in Australia and elsewhere, the US stock market, Bitcoin, and the US$1.2 quadrillion global derivatives trade, a looming global financial crisis threatens Australia’s banking system. It is urgent, therefore, that Australians demand their MPs reject this bill outright, and go with the Glass-Steagall banking regulation instead, which guarantees deposits and financial stability by separating commercial banks with deposits from all forms of financial speculation. As Dr Sy says in his submission: “The global financial system needs fundamental structural reform which many countries believe is the restoration of the Glass-Steagall legislation which had worked well for many decades until it was corruptly or mistakenly repealed at the turn of this century.”
    What you can do
    Before Christmas, upwards of 800 everyday Australians flooded the Senate committee inquiry with submissions opposing the APRA bill and demanding Glass-Steagall. The Committee is expected to hold hearings in either late January or early February, by which time it is imperative that every MP and Senator is confronted with the truth about this bill.

    1. Forward this release, the CEC’s submission (linked below) and Dr Sy’s submission (linked below) to your local federal MP and Senators before the end of the month. If possible, print copies and deliver them in person.

    2. Sign and share the CEC’s latest petition: http://cecaust.com.au/glass-steagall/

    #1 Dr Sy submission. #11 CEC submission. – https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/CrisisResolutionPowers/Submissions

  4. Well, unsurprisingly for me, those that matter in the markets must have seen my 9:58 PM post hereon yesterday, and my above post.
    Because:
    a) Europe and the S&P futures are struggling to maintain their levels;
    b) Put prices have gone up noticeably as volatility has suddenly increased, around the whole world … the entire universe.

    Just goes to show: ** One just never knows the effects one can have on others **

    • Never really understood the purpose of your comments e.g. in a hard down turn goods and services abound, tho none have money.

      Not to mention the psychological aspect.

      disheveled…. your dialectal style is akin to blackrocks rational agent model swimming around in its mainframe…