Global markets so jittery they are rocked by the possibility of news

The market exit looks more crowded than a Who concert in Cincinnati.

Judging from today’s early morning read of the global markets bonds are being sold off hard across the board as yields climb to levels in Asia and Europe that have not been seen in years. All major bond indices across the globe have yields climbing higher lead by the German 10-year bund, which hit 0.54%, a level not seen since the end of 2015.

The spill over to global stock sell off began in Asia tepidly, but is ramping up across Europe and as the US eyes its opening bell in the red.

It appears all this cash is moving into commodities as crude oil, natural gas and precious metals are all moving higher.

The impetus for the market moves seem to be coming before the ECB releases its minutes from its June meetings. Since the Fed minutes on Wednesday had little information on the timing of its  selling off some of its balance sheet assets, investors are looking for direction and timing from the ECB.

This is how skittish large market players are today. The hint of a possibility of a bit of information can rattle the largest securities markets around the globe.

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ECB still easing down the road

The ECB  announced Thursday that it will keep rates at the zero bound level and will continue EQE for an extended period of time.

The plan prior was to keep buying bonds and equities until March 2017, but today the ECB said it can extend its purchasing of securities past that date as Europe is wracked negative interest rates and near zero growth.

European chief Mario Draghi said that the ECB will continue purchasing bonds both corporate and sovereign issues as well as equities of European firms for an extended period of time.

I believe in the press conference later Thursday, Draghi will have to broaden the definition of what securities the ECB can buy as issuance of existing bonds has dried up.

 

Deutsche chief Cryan sees “fatal consequences"

Deutsche Bank chief John Cryan fired his latest salvo not at his usual target Mario Draghi and the ECB, but directly to the German people.

The chairman of the largest European bank told the press in a passion plea that if the ECB continues its negative interest rate policies, it could led to  “fatal consequences” for savers and pension plans.

“The ECB’s policy is squeezing the margins of Europe’s struggling banks, making it harder for insurers to find profitable investments and dangerously distorting financial market prices,” Cryan told reporters.

Cryan pointed out that 90% of Germans have their savings in the bank and are getting no return on their investments.

Cryan has also faulted ECB chief Draghi for his policies of telling banks to increase reserves, yet the bank makes no interest on those reserves with negative returns on German sovereign debt trading below zero.

I’m not sure I have ever heard a bank chairman use the term “fatal consequences.” You could put Cryan’s comments in the column with other big name investors predicting dire consequences due to central bank policies.


Thursday morning we got news from both ends of the retail sector — Tiffany and Sears both reported horrible quarters.

Sales were down almost double digits at Tiffany year-over-year and Sears continues to lower sales comps quarter-over-quarter since hedgie Eddie Lampert took on the CEO role in 2013.

Tiffany blamed China, Lampert doesn’t comment. Yet it is more amble proof that the US consumer on both ends of the spectrum is pulling back and squirreling away the meager discretionary income they have for staple products.

Did Deutsche knock on ECB door for cup of cash?

Had two calls from institutional traders late Monday afternoon saying they heard rumors that Deutsche Bank had gone to European Central Bank to get a loan to fund overnight operations.

A call into DB’s NYC office said they knew nothing of that, but said that action would come from the German HQ, not NYC.

The stock reaction does not show any traction to the rumor.

Sure there is the story of DB’s laundering $10 billion in Russian money, along with the Commodities Futures Trade Commission’s slapping the German bank for mis-pricing of swaps, but neither of those actions had a great effect on the stock on Monday.

These rumors — though unsubstantiated so far — may have a ring of truth, so be aware of a pending problem, which could lead to another banking crisis that has been spoken about by many large Wall Street players warning the Street a Lehman-like event is about to happen.

No yen for helicopter money, maybe?

Wednesday night news out of Tokyo said Bank Of Japan was going to launch a Y10 to Y20 TRILLION in helicopter money.

Helicopter money is where the government gives cash to the general population in leiu of the banks to spur spending and growth.

Well the headlines drove high frequency traders to buy, buy, buy on the news. By Thursday morning Bank of Japan chief Kuroda said there is no plan to execute that plan and in fact the news was a month old.

The news had credence, since ex-Fed chief Ben Bernanke was said to be talking to the Japanese central bankers about what to do to break an almost 30-year economic malaise.

The news had the markets gyrating due to USD-YEN movements. Stock markets move higher on a weaker yen, which helicopter money in the trillions would do. So when the announcement from central banker Kuroda walked back that news the yen strengthened and US futures fall.

There is such a coorelation between $/Y and US equity markets that trumps all other economic/monetary news. The yen carry trade is mother’s milk to high-frequency trading algorythms

Now don’t be surprised if the market takes the news that Kuroda said no helicopter money a month ago and says that he might be for it now. Stranger things have happen.

And just for good measure we get ECB chief Mario Draghi talking Thursday morning on what that central bank may or may not do with Italian banks.