Ahead of today’s FOMC announcement, which comes without a press conference and has thus been dismissed as a possible start to a Fed hiking cycle, the Fed has a big problem. It’s not jobs, which are running at a pace that many suggest is strong enough to sustain at least a 25 bps hike to nearly a decade of ZIRP, assuming of course one completely ignores the “quality” component as virtually all recent job growth has been in the low-paying job category especially waiters and bartenders…
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Stocks rallied today because the Fed meets today and tomorrow and traders are conditioned to play for a rally into Fed meetings. Also, stocks had fallen for four days straight prior to this and so we were oversold in the near-term.
The larger picture concerns the bursting of China’s stock bubble as well as the ongoing 3rd Greek bailout drama.
Regarding China, anyone who actually bothered performing real analysis could have seen that the economic data coming out of that country was totally bogus. Indeed, back in 2007, current First Vice Premiere of China, Li Keqiang, admitted to the US ambassador to China that ALL Chinese data, outside of electricity consumption, railroad cargo, and bank lending is for “reference only.”
With that in mind, China’s rail volumes had been collapsing at a pace not seen since the Asia Financial Crisis!
DOE EIA crude oil inventory report 29 July 2015
- Prior 2.468m
- Cushing -212k vs +250k exp. Prior 813k
- Gasoline inventories -363k vs +250k exp. Prior -1.725m
- Distillates 2.588m vs 1.450m exp. Prior 235k
The expected number in the headline was Bloomberg’s secondary estimates following the API data which showed a 1.9m drawdown. Their prior forecast was for a 850k build
Goldman: We don’t expect additional language intended to prepare for rate hikes in the statement. We expect the statement to drop its prior reference to stable oil prices, but to leave other comments about inflation unchanged. We still see December as most likely lift off date.
Citi: We see hawkish risks on the Fed and with investors consolidating positioning at present, It could spur another leg higher in USD. Awaiting decision markets likely to trade in suspended animation
Morgan Stanley: Investors hope that today’s Fed statement may provide some guidance with respect to future Fed monetary policy, but with inconclusive data, Yellen’s Fed should have no incentive to diverge from her HH remarks made less than a couple of weeks ago. Hence, US front-end yields are unlikely to rally at this point, withdrawing support from USD against most DM currencies, notably EUR and GBP.
Credit Suisse: Credit Suisse’s US economics team believes the Fed will hike by 25bp in September, followed by four further hikes in 2016. To this extent, they have a strong expectation that the Fed will use this week’s Fed meeting to provide a strong hint that a rate hike is around the corner, as was done in previous hiking cycles starting in 1999 and 2004. While the market is still priced for a 25bp this year, it is roughly 50:50 on the likelihood of a September hike. As such, a strong signal would likely be USD-positive outcome, unless it was somehow accompanied by a forceful signal that the terminal rate would be lower and/or reached more slowly than expected. This is why we continue to run long USD positions into the FOMC meeting. >> Read More
On Tuesday we documented the rapid collapse of the Greek economy. According to data presented at an extraordinary meeting of the Hellenic Confederation of Commerce and Entrepreneurship, retail sales have fallen 70%, while the The Athens Medical Association recently warned that 7,500 doctors have left Greece since 2010.
To be sure, assigning blame for the economic malaise is difficult as it’s still largely unclear whether internal structural problems or externally imposed belt tightening deserve the lion’s share of the blame, but there certainly does seem to be a growing consensus among impartial observers that creditors’ insistence on the implementation of still more austerity in the middle of what amounts to a depression may be a fool’s errand – especially with capital controls serving to constrain economic activity.
It is against this backdrop that Greek PM Alexis Tsipras will attempt to pass a third set of prior actions through parliament – this will be the first such vote to take place with representatives of the “Quadriga” on the ground in Athens. As we noted on Tuesday, “if creditors aren’t satisfied with the progress by August 18 (i.e. if for any reason Tsipras doesn’t manage to get the third set of bailout prerequisites by lawmakers), then paying the ECB on August 20 won’t be possible and then it’s either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the economy but the banking sector and then, in short order, the government. And through it all, the PM is attempting to beat back a Syriza rebellion (which will only be exacerbated by the upcoming vote on the third set of measures) while convincing the opposition that he’s not secretly backing the very same Syriza rebels in their attempts to forcibly take the country back to the drachma.” >> Read More
SC dismisses Yakub Abdul Razak Memon’s plea against his scheduled execution tomorrow in 1993 Mumbai blasts case.
— Press Trust of India (@PTI_News) July 29, 2015
Greek PM speaking with Sto Kokkino radio. Bloomberg reporting
- Greece can’t return to markets with current debt levels
- next 6 months will be crucial for EU and Eurozone area
- creditors decided to shut down Greek banks as an act of revenge
- Greek banks would have collapsed if he had ended talks
- had little choice but to call a referendum but was a high-risk option
- his mandate was to stop destruction of Greece
- never promised Greeks a walk in the park
- things have changed for Greece and the Syriza party
Greek PM still talking
- deal with creditors was a painful compromise
- effect of bailout talks on Greek economy are reversible
- EU conservatives still hold Grexit scenarios
- primary budget surplus might be 0.0% /GDP this year depending on circumstances
- bailout is wrong recipe, will fight to overturn it
- Greece will only implement Euro summit decisions
Tsipras in defiant mood but is it going to help reach a much needed agreement?
Elsewhere the deputy fin min Alexiadis says he hopes to raise €2.65bln from real estate tax
Tsipras- never promised his people a walk in the park
— The Economist (@TheEconomist) July 29, 2015
Dear SEBI ,Just check out the movement of DLF From 94 to 104…..Check details from stock exchange ,who bought first why news was flashed ??
— Anirudh Sethi (@anirudhsethi71) July 29, 2015
If Rally Continues in Nifty Future ,Now at 8373
Yes ,All Eyes on 8415 & 8436 is LAXMANREKHA……….Levels valid for Tomorrow too.
Hurdle at 18429——18488 will act as LAXMANREKHA !
More to our Subscribers ,Updated at 15:04/29th July/Baroda