EM crisis would test US Fed

[phantom_opera]

Real test comes

Market will be looking for US Fed again

Any hint on holding tapering will send the market soaring again

10y UST back to 2.7% region, Dow testing 15,500 soon

[phantom_opera]

meanwhile ...

FOXNEWS- The U.S. Postal Service will increase the cost of a stamp on Monday to 49 cents from the current 46 cents.

The spike is a 6.5 percent jump, contrary to the Postal Accountability and Enhancement Act, which states that stamp prices cannot increase faster than the rate of inflation, The Wall Street Journal reported.



Read more: http://fox17online.com/2014/01/26/pr...#ixzz2rYJVbWpd

[Lovelle]

nibble some stocks today after 45 points drop

[DC33_2008]

Emerging-Market VIX Surges Most in Two Years on Selloff

By Nikolaj Gammeltoft and Callie Bost - Jan 26, 2014
Equity volatility from India toBrazil and Turkey jumped the most in two years as turmoil spread across global markets amid a selloff in developing-country currencies and growing concern over China’s economy.
The Chicago Board Options Exchange Emerging Markets ETFVolatility Index rose 40 percent to 28.26 last week, the biggest increase since September 2011, according to data compiled by Bloomberg. Bearish bets outnumber bullish ones on the underlying exchange-traded fund by the most since July with about 60 percent more puts than calls.
The devaluation of Argentina’s peso, data signaling a possible contraction in China’s factory output and declines from the Turkish lira to the South African rand shook investor confidence. Emerging-market equities have tumbled since theFederal Reserve signaled in May that it could start scaling back bond purchases that boosted demand for higher-yielding assets.
“There’s concern that the downtrend may continue,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said by phone on Jan. 24.“Protection is being purchased or bets are being made that it will.”
The MSCI Emerging Markets Index fell 2.3 percent to 949.90 last week, extending this year’s slump to 5.3 percent. The European equity benchmark lost 3.3 percent, while the Dow Jones Industrial Average (INDU) sank 3.5 percent for the biggest weekly decline since May 2012.
Global Markets

The global selloff resumed today with Dubai shares falling the most in two months. New Zealand markets will be the first to open on Monday and U.S. futures start trading at 7 a.m. inTokyo.
Argentina, Hungary and Chile led declines among emerging-market equities with losses exceeding 2 percent on Jan. 24. Brazil’s Ibovespa slid to its lowest level in five months, while Russian equities retreated for three straight days last week.
Traders are piling into hedges after a global rally in developed markets that has had few interruptions. The Standard & Poor’s 500 Index (SPX) jumped 30 percent in 2013, the most in 16 years, and hasn’t posted a decline of more than 10 percent in 27 months. For the MSCI All-Country World Index, the last retreat of that size was in June 2012.
Implied Volatility

Investors traded almost 600,000 puts on the iShares MSCI Emerging Markets ETF on Jan. 24, three times the average from the past 20 days, data compiled by Bloomberg show. About 150,000 calls changed hands, 45 percent more than the mean.
Implied volatility, the key gauge of options prices, rose 17 percent to 22.83 last week for the emerging-markets ETF, according to data compiled by Bloomberg on contracts expiring in three months. The measure reached the highest level since December as investors bought options to insure against further losses in underlying equities.
The biggest options trade last week on the emerging-market ETF has more than doubled in value. An investor purchased 53,500 February $39 puts on Jan. 23 for approximately $3 million, according to New York-based Trade Alert LLC. The contracts, which were bought for 57 cents each, finished trading last week at $1.36.
In the second-largest transaction, someone purchased about $2 million of 122,000 May $46 calls on Jan. 22, buying them for 16 cents each, according to Trade Alert. The bullish contracts closed at 7 cents on Jan. 24.
Open Interest

Among the 10 options with the highest ownership on the emerging-market ETF, eight were bearish, according to data compiled by Bloomberg. February $40 puts and February $39 puts had the most open interest. The iShares ETF retreated 3.9 percent to $38.24 last week.
Argentina will ease currency controls after the peso’s slide brought the rate to a level Cabinet Chief Jorge Capitanich said was acceptable.
“We’re still cautious on emerging markets,” Timothy Ghriskey, who oversees $1.5 billion as the chief investment officer at Solaris Group LLC, said by phone last week from New York. “A significant part of emerging markets keys off of China and the Chinese economy and that’s what we watch very closely. Although there have certainly been signs of improvement, there are also signs of weakness.”
Currency Selloff

Chinese factory output may shrink this month, a preliminary survey from HSBC Holdings Plc and Markit Economics indicated last week as the People’s Bank of China injected more funds to the financial system to ease a cash shortage.
A Bloomberg gauge tracking 20 emerging-market currencies fell to the lowest level since April 2009 on Jan. 24. The Turkish lira weakened to a record low against the dollar and the South African rand sank to the weakest since October 2008, while Argentina’s peso depreciated to an unprecedented low.
Equities retreated worldwide amid growing concern that cuts to the Fed’s stimulus program will hurt the global economy. TheS&P 500 slid 2.6 percent last week, the most since June 2012. The VIX (VIX), as the Chicago Board Options Exchange Volatility Index is known, jumped 46 percent to 18.14 for the biggest increase since 2010.
Temporary Volatility

Emerging-market stocks have underperformed advanced-nation shares during times of financial stress in the past two decades, including Latin America’s so-called Tequila Crisis in 1994 after Mexico’s peso devaluation and Russia’s default on $40 billion of debt in 1998. The MSCI Emerging Markets Index lost 54 percent in 2008, 12 percentage points more than the gauge of shares in developed nations.
The jump in volatility and retreat in stock prices are temporary because the global economy remains healthy, according to Andrew Wilkinson, the Greenwich, Connecticut-based chief market analyst at Interactive Brokers LLC.
“People do not expect this to last across time and I would expect volatility to subside in the weeks ahead,” Wilkinson said in a phone interview. “There’s a belief Argentina is in a basket of its own and I wonder how sustained the move down in stocks is going to be.”
The VIX last week closed above its futures contracts that expire over the next five months, an event known as backwardation. That suggests greater concern about the immediate future because the cost of hedging against short-term price swings is higher than what traders pay to shield themselves fromvolatility in the longer run, Wilkinson said.
Investor Poll

International investors are the most upbeat about the global economy than at any time in almost five years, buoyed by the U.S.-led revival of industrial nations, according to the Bloomberg Global Poll.
On the eve of the World Economic Forum’s annual meeting in Davos, Switzerland, last week, 59 percent of Bloomberg subscribers surveyed on Jan. 16 and 17 said the economic outlook was improving. That’s up from 33 percent in November and marks the most optimistic result since the poll began in July 2009.
There are about 3.32 million puts outstanding on the iShares MSCI Emerging Markets ETF, compared with 2.04 million calls, according to data compiled by Bloomberg.
The VStoxx Index, which measures the price of options to protect against Euro Stoxx 50 Index losses, jumped 33 percent to 20.93 last week. The HSI Volatility Index, based on Hong Kong’s Hang Seng Index, climbed 9.3 percent to 15.16, while the measure for Brazil increased 23 percent to 28.28.
The CBOE S&P 500 Short-Term Volatility Index, tracking nine-day options on the stock gauge, soared 82 percent in the past five days, the biggest increase on record, to 20.84.
“People at the moment are more comfortable owning U.S. dollars and with a stronger U.S. economy,” Gabriel Wallach, who manages about $2.5 billion as the Boston-based chief investment officer of global emerging-market equities at BNP Paribas Investment Partners, said by phone. “They are worried about a slowdown in China still.”
To contact the reporters on this story: Nikolaj Gammeltoft in New York at [email protected]; Callie Bost in New York at [email protected]
To contact the editor responsible for this story: Lynn Thomasson at [email protected]

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

[k00L]

If fed tapers faster than expected, usd up
If europe undergo deflation, usd up
If china credit bubble burst, usd up
If emerging market sell off, usd up

So long usd trade is no brainer trade for 2014

[indomie]

Everything that happens is by design. Nothing happens by accident anymore. EM and China is the only game in town. US will not pull back. If they pull back who is going to use the USD anymore? Even a drug dealer must guarantee supply to keep the party going. A sudden pull back in supply is hurting the dealer as well as the user.

[RCT]

Everything that happens is by design. Nothing happens by accident anymore. EM and China is the only game in town. US will not pull back. If they pull back who is going to use the USD anymore? Even a drug dealer must guarantee supply to keep the party going. A sudden pull back in supply is hurting the dealer as well as the user.

hahaha.. drug dealer will first let u enjoy the drug cheap by oversupplying it.. When the drug dealer feel the time is right, it will reduce the supply of the drug to increase the price. The game is never about countries.. It is about bankers. This is the war between central banks.

[phantom_opera]

The 10-year note yield will rise to 3.37 percent by Dec. 31, according to the weighted-average estimate in a Bloomberg survey of analysts. The Fed decided in December to reduce its monthly bond buying to $75 billion from $85 billion, starting in January.

=> that means 10y SGS around 2.9%

anybody thinks this wont happen?

[indomie]

hahaha.. drug dealer will first let u enjoy the drug cheap by oversupplying it.. When the drug dealer feel the time is right, it will reduce the supply of the drug to increase the price. The game is never about countries.. It is about bankers. This is the war between central banks.

USD must be distributed far and wide to earn the yield. If they decide to keep it for themselves, it will yield less than nothing (negative yield).

[phantom_opera]

looks witchy

[pmet]

US won't give a damn about EM. In the first place, they already didn't listen to the complaints by FM around the world when they first started QE and extended it several times over the past 5 years. What makes you think US will tinker their tapering to help EM this time?

Also, the USD vs EUR has dropped to multi-year low and is already below the threshold set by ECB so the only concern they have is no longer a concern. EM... not much since Yuan is pegged. Other EM like SGD, forget about it! LOL SGD is pisai to the US.

I think all conditions are right for the FED to move ahead with tapering.

Looking at the STI now makes me happy...

[teddybear]

How true! It is a no brainer now!

If fed tapers faster than expected, usd up
If europe undergo deflation, usd up
If china credit bubble burst, usd up
If emerging market sell off, usd up

So long usd trade is no brainer trade for 2014

[Arcachon]

http://www.youtube.com/watch?v=DyV0OfU3-FU

USD is going to rise against all currency (not money) because paper is getting rare, history already repeat itself.