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Europe's Carnage Continues: Stress Tests Reveal No Faith In The Continent's Big Banks

Takeaway: The Euro Stoxx Bank sub-index is down -7.5% so far this week, as stress tests revealed big bank weakness.

Europe's Carnage Continues: Stress Tests Reveal No Faith In The Continent's Big Banks - Europe three bears cartoon 07.21.2016 

 

It was an ugly day for European stocks. Eurozone equity markets were down between -0.8% and -2.8% today as investors continued the mass exodus out of the continent's struggling banks.

 

Europe's Carnage Continues: Stress Tests Reveal No Faith In The Continent's Big Banks - european equities 8 2

 

Check out the collection of laggers in the Euro Stoxx 600 below. Leading the losers were a handful of Italian bank stocks. Topping the list was Monte dei Paschi di Siena (BMPS.Italy), down nearly -13% today, after failing European stress tests and announcing a supposed "definitive solution" to solve its legacy of bad loans. Note: The bank has lost €4.2 billion in market capitalization since Q2 2015 or 83% of its value.

 

Europe's Carnage Continues: Stress Tests Reveal No Faith In The Continent's Big Banks - europe leaders lagg 8 2

 

The Euro Stoxx Bank sub-index is down -7.5% so far this week.

 

Europe's Carnage Continues: Stress Tests Reveal No Faith In The Continent's Big Banks - european bank stocks

 

As the European carnage continues, we reiterate our call ... #EuropeImploding.


Asinine Fed Doublespeak (You Just Can't Make This Stuff Up)

Takeaway: Fed heads are putting the most wish-washy, flip flopping politicians to shame.

Asinine Fed Doublespeak (You Just Can't Make This Stuff Up) - Hawk dove cartoon 06.06.2016

Confusion.

 

That's probably the best way to sum up market uncertainty surrounding future Fed rate hikes. Regional Fed presidents continue talking out of both sides of their mouth, under the guise of "data dependence." Investors? They're left scratching their heads.

 

After last Friday's GDP implosion (1.2% for 2Q16 ... half what Wall Street economists predicted), market implied rate hike probabilities for September and November FOMC meetings dipped below 20%. Meanwhile, Fed governors are out there chomping at the bit to get their names in print ... trying to convince investors that the next three meetings of 2016 are "live." Okay.

 

Newsflash. The U.S. economy is slowing.

 

Take a look below at some recent headscratching headlines courtesy of our omnipotent Fed. You can't make this stuff up.

 

Asinine Fed Doublespeak (You Just Can't Make This Stuff Up) - dudley 8 2

 

Here's the opening line from CNBC's story:

 

"The market shouldn't be ruling out the possibility the Federal Reserve will hike interest rates again this year, William Dudley, president of the New York Fed, said on Monday."

 

Now cue the Reuters story (again the opening line):

 

"The Federal Reserve should be cautious on interest rate increases due to lingering risks to the U.S. economy, one of its most influential policymakers said on Monday, appearing to signal the chance of a hike by the end of the year was fading."

 

(NO WORDS...)

BUT wait. it gets worse.

 

Enter Dallas Fed head Robert Kaplan with his two cents. 

 

Asinine Fed Doublespeak (You Just Can't Make This Stuff Up) - kaplan 8 2

 

Holy smokes.

 

All of this is seemingly innocuous to a casual observer. But it underscores the frenetic nature of Fed following these days. Here's a brief recap of the year-to-date Fed policy pivots which is either disillusioning or highly frustrating (perhaps both):

 

  • Hawkish in December
  • Dovish in March
  • Hawkish in May
  • Dovish in June
  • Hawkish in July

Asinine Fed Doublespeak (You Just Can't Make This Stuff Up) - Fed grasping cartoon 01.14.2015 

 

These Fed heads put even the most wish-washy of flip flopping politicians to shame...

 

Asinine Fed Doublespeak (You Just Can't Make This Stuff Up) - fed flip flops

What does it all mean?

 

Here's a mouthful: Following the frantic Fed's fork-tongued forecasts is a fool's errand.

 

Fade the Fed.


PREMIUM INSIGHT

[UNLOCKED] Fund Flow Survey | Another Week Of Record Outflows

[UNLOCKED] Fund Flow Survey | Another Week Of Record Outflows - dollar pic

This is a complimentary research note originally published July 28, 2016 by our Financials team. If you would like more info on how you can access our institutional research please email sales@hedgeye.com.


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Daily Market Data Dump: Tuesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Tuesday - equity markets 8 2

 

Daily Market Data Dump: Tuesday - sector performance 8 2

 

Daily Market Data Dump: Tuesday - volume 8 2

 

Daily Market Data Dump: Tuesday - rates and spreads 8 2

 

Daily Market Data Dump: Tuesday - currencies 8 2

 

Daily Market Data Dump: Tuesday - commodities 8 2


Banzai? Japan Unveils ¥28.1 Trillion Viagra Package ... Market Shrugs

Takeaway: Imagine there’s actually a credit consequence to this nonsense.

So ... Japanese Prime Minister Shinzo Abe’s cabinet just approved a ¥28.1 TRILLION fiscal bazooka. For the record, that's roughly $274,000,000,000 in U.S. Dollars. And then ... and then ... both Yens and JGBs went the wrong way on the news!

 

Wow. Imagine there’s actually a credit consequence to this nonsense.

 

JGB 10yr yield now +18 basis points in a month (to -0.08%); Nikkei resumes #crash mode, down -1.5% overnight (-22% from the 2015 Global Equity Bubble High)

 

Banzai? Japan Unveils ¥28.1 Trillion Viagra Package ... Market Shrugs - nikkei 8 2

 

Post-fiscal stimulus approval, Yen down -0.6%...

 

Banzai? Japan Unveils ¥28.1 Trillion Viagra Package ... Market Shrugs - usdjpy 8 2

 

In the past month, JGB 10yr up +18.7 basis points.

 

Banzai? Japan Unveils ¥28.1 Trillion Viagra Package ... Market Shrugs - jgb 8 2


CHART OF THE DAY | Oil: Where To From Here?

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... Where to from here?

 

  1. USD - continues to signal bullish TREND inasmuch the Euro and Pound are signaling bearish TREND vs. USD
  2. SUPPLY – tell me a story that isn’t, in rate of change terms, showing a rising probability of rising supply in Q3/Q4
  3. DEMAND – did it ever matter? If it does, US Consumption is currently lapping its peak comp (on a 2yr basis) in Q3

 

I know. I’m not an Oil man. But those are the Top 3 reasons why I’m not long Oil right now. Most “asset classes” that sustain volatility levels > 30 aren’t my cup of tea (I drink coffee). Oil Volatility (OVX) is breaking out > 45 this morning. That’s scary."

 

CHART OF THE DAY | Oil: Where To From Here? - 08.02.16 el chart


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.28%
  • SHORT SIGNALS 78.51%
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