With futures slamming the lows at their open yesterday evening, touching levels not seen since May, and with the EuroStoxx 50 officialy entering correction just hours ago, down 10% from the June highs, many were wondering if the NY Fed's Chicago Trading Desk, aka Overnight Ramp Capital LLC, would be put in damage control duty and send futures right back to unchanged (because with new Ebola case reports springing up everywhere from Boston to Los Angeles, the pandemics is clearly contained). The answer, with a whopping 25 point levitation on no volume, and futures which are pointing now well into the green (not to mention the Eurostoxx rebounding off the lows and now green too), is a resounding yes. Curiously this happened even after China reported another set of imaginary, goalseeked trade numbers, where the trade deficit missed expectations but both exports (+15.3% vs. Exp. +12.0%) and imports (+7.0% vs. Exp. -2.0%) surged beyond expectations, which says nothing about China's actual trade (recall the trade data is not only goalseeked a la carte but distorted thanks to Commodity Funding Deals), but everything about China's nonexistant intentions to inject further stimulus into the market/economy. That said, with liquidity and overnight volumes non-existent, it wasn't difficult to manipulate ES higher and since Japanese markets are closed today for a holiday, while Columbus day will keep the US bond market offline, this levitation may well continue. On the other hand, sending crude (Brent was just under $89 at last check as Saudi Arabia keeps doing America's bidding in getting the Kremlin to finally kneel) higher, while pushing bond prices lower (a yield of 2.28% again is basically screaming global recession) may be far more difficult for those Federal employees concerned only with the optics of day to day stock market moves and generating confidence in the economy courtesy of a rigged and manipulated market. The Shanghai Composite is around 0.4% lower overnight but off its intraday lows. Indeed it has been a fairly weak session for Asian equities. Bourses are in the red across the board (Hang Seng -0.6%, HSCEI -1.0%, KOSPI -0.8%, ASX 200 -0.8%) following the negative US lead on Friday. Treasuries continue to catch a bid on the back of the risk-off tone with the 10yr closing around 3bps lower at 2.28% (at a YTD low and lowest since June 2013) on Friday (closed for Asian session overnight). In FX, the Dollar is weaker overnight (DXY -0.5%) which did little to support Oil prices. The correction in Oil continues with Brent down 1.3% overnight at US$88.9/bbl (near a four year low). Asian stocks fall with the Hang Seng outperforming and the Kospi underperforming. The Nikkei 225 is closed for holiday in Japan. MSCI Asia Pacific down 0.1% to 136.4. Hang Seng up 0.2%, Kospi down 0.7%, Shanghai Composite down 0.4%, ASX down 0.6%, Sensex little changed. 4 out of 10 sectors rise with utilities, telcos outperforming and tech, energy underperforming European equities have taken the opportunity to cover short-positions as the recent corrective sell-off somewhat abated in the first few hours of trade. Materials and industrials lead the way higher, as a brief spell of USD-weakness and poor performance from Asia-Pacific equities lifted spot gold to trade at 4-week highs of USD 1,237.80/oz. 3 out of 19 Stoxx 600 sectors rise; basic resources, autos outperform, food & beverage, financial services underperform. Eurostoxx 50 -0.2%, FTSE 100 -0.3%, CAC 40 -0.3%, DAX -0.2%, IBEX -0.3%, FTSEMIB little changed, SMI -0.8%, although this was as of the last time we hit F5, and since then Ramp Capital has been very busy. Looking ahead, US traders will be eyeing any recovery in equities after the 200DMA in the S&P 500 (1905) held on Friday, with the data calendar looking very quiet. The backdrop of earnings season looms, with BofA, Citigroup, JPMorgan and Goldman Sachs all due over the next five days. Tomorrow will see the release of Germany’s ZEW survey alongside CPI prints from the UK, France and Spain. Wednesday’s data highlights will include the US retail sales for September, the Fed’s Beige Book, CPI readings from China and Germany, US PPI, and the NY Fed Empire State survey. Draghi will speak twice on Wednesday which could also be a source for headlines. On Thursday, we will get Industrial Production stats and the Philly Fed Survey from the US on top of the usual weekly jobless claims. European CPI will also be released on Wednesday. We have the first reading of October’s UofM Consumer Sentiment on Friday along with US building permits/housing starts. Yellen’s speech at the Boston Fed Conference on Friday (entitled “Inequality of Economic Opportunity”) will also be closely followed. Away from the macro events this week, it will also be a busy week for company earnings. We have over 50 S&P 500 companies lined up for quarterly results (nearly a fifth of the index’s market cap). JPMorgan and Citigroup will kick things off for US banks tomorrow followed by BofA on Wednesday, Goldman Sachs on Thursday, and Morgan Stanley on Friday. Away from Financials, we have the likes of Intel, Johnson & Johnson, Google, and GE also reporting this week. Market Wrap S&P 500 futures up 0.1%1 to 1891.4 Stoxx 600 unchanged 320.3 US 10Yr yield down little changed at 2.28% German 10Yr yield little changed at 0.89% MSCI Asia Pacific down 0.1% to 136.4 Gold spot up 0.6% to $1230.6/oz Bulletin Headline Summary from Bloomberg and RanSquawk Oil markets slump further after Saudi Arabia reportedly signalled that the country is comfortable with low oil prices for an extended period – a move reportedly targeting countries that look to expand oil production (including US shale plays) US equity futures indicate a slightly higher open, however sentiment remains very fragile after the S&P 500 suffered the worst two-day performance last week since the taper-tantrum in 2013 US Columbus Day keeps bond pit trading closed, however all other markets open as usual. Traders eye upcoming earnings from JP Morgan, Bank of America, Citigroup and Goldman Sachs this week FIXED INCOME Bund futures failed to break above contract highs of 150.78 shortly following the open, leading to short-term profit-taking and allowing the 10yr yield in Germany to test 0.89% to the upside. Portuguese debt underperforms Germany, with the PO/GE 10yr spread wider by 5.5bps after Fitch affirmed the Portuguese rating at BB+ on Friday - against expectations of a rating upgrade. UK fixed income outperforms, with the UK curve markedly flatter as the Euribor strip is stymied by reports of division amongst the ECB board, after ECB President Draghi’s relationship with Jens Weidmann becomes ‘near impossible’ – lessening the likelihood of an unified agreement to tackle deflation via QE. EQUITIES Amid holiday thinned markets (Japanese markets closed, US bond pit to remain shut for Columbus Day), European equities have taken the opportunity to cover short-positions as the recent corrective sell-off somewhat abated in the first few hours of trade. Materials and industrials lead the way higher, as a brief spell of USD-weakness and poor performance from Asia-Pacific equities lifted spot gold to trade at 4-week highs of USD 1,237.80/oz. Looking ahead, US traders will be eyeing any recovery in equities after the 200DMA in the S&P 500 (1905) held on Friday, with the data calendar looking very quiet. The backdrop of earnings season looms, with BofA, Citigroup, JPMorgan and Goldman Sachs all due over the next five days. FX The USD was initially dented in Asia-Pacific trade, as strong buying of the JPY amid holiday-thinned markets weakened the greenback, however the USD has regained some clamour as real-money selling brings EUR/USD off its highs, twinned with European banks taking profit on USD/JPY shorts. AUD trades stronger across the board, as the recent poor performance is partially reversed after China’s trade balance showed both exports (+15.3% vs. Exp. +12.0%) and imports (+7.0% vs. Exp. -2.0%) surged beyond expectations. COMMODITIES WTI crude futures tumbled in a continuation of recent weakness as Saudi Arabia have reportedly signalled to market participants that they are comfortable with an extended period of low oil prices – a tactic that some see as a message to other producers looking to increase their output (including US shale plays). (RTRS) Furthermore, Iraq trimmed its price differentials for Basrah Light supplies to Asia and Europe for November, helping accelerate the downside. (RTRS) The Venezuelan foreign minister has called for an urgent OPEC meeting to deal with falling oil prices. (WSJ) However, Kuwait's oil minister said OPEC is unlikely to cut oil production in an effort to prop up prices because such a move would not necessarily be effective. *** DB's Jim Reid concludes the overnight event summary The IMF meeting in Washington dominated the weekend headlines which according to the DB staff in attendance was a bit of a worryfest. Worries over global growth, especially in Europe, dis-inflation and secular stagnation came out in style. However timing is everything in financial markets and had this mass gathering been held 2-3 weeks ago it probably would have been dominated by how US growth was going to de-couple from the rest of the world and ultimately drag everyone else up by the bootlaces. As it was the event we hosted with Larry Summers was the big draw as the secular stagnation theme resonated. A reminder that we did an in depth piece on this topic in our long-term study last month for those who want to read more. We still believe secular stagnation is a real issue across large parts of the globe because of demographics, poor resource allocation, a large debt overhang and inequality (to name a few key themes). Such economies arguably need asset bubbles to sustain semi-acceptable growth. This is perhaps why the Fed withdrawing QE and talking about policy normalising seems to be having such an impact on markets. However betting against central bankers hasn't ultimately been successful in recent years and at some point soon we may start to appreciate that the Fed aren't likely to raise rates in a weak capital market or economic environment. As for the ECB, the next (and major) response will likely be slow to materialise but it probably will happen. Full QE in 2015 is still the most likely scenario and while it may not have much impact on the economy, the money is likely to find its way into asset markets. So while we would be reasonably bearish on the macro fundamentals still, we suspect the liquidity theme will come back well before year-end. However as we've recently discussed, volatility is certainly back to stay in a world without Fed QE. In response to all these growth fears, the central bankers in Washington generally responded in dovish terms over the weekend. The one that stood out was perhaps comments from Fed’s Vice Chairman Stanley Fischer who said that “if foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise". He also hinted that the market is roughly on the mark regarding the timing of US rate hikes but it is perhaps a reminder that the global outlook does matter for the Fed. As for other dovish sound bites, Fed Governor Daniel Tarullo speaking at an IIF conference said that he is worried about global growth and noted “there are more downside risks than upside risks” which is “obviously something we have to think about in our own policies”. Chicago Fed’s Evans also said that a strengthening of the USD and weak growth aboard could mean slower inflation in the US and less justification for the Fed to hike rates. Away from Fed officials there was also more debate around what is the right policy for Europe - in particular the mix between monetary and fiscal policies. Draghi said that ECB’s balance sheet expansion is the last monetary tool left to revive inflation. Draghi reiterated his EUR1trillion target but this was met by some opposition by Bundesbank’s Weidmann who said that a target value isn’t set in stone. Indeed Germany looks rather isolated when it comes to policy prescriptions for Europe. Draghi’s call for easier fiscal policies from European countries (that can afford to) was opposed by Germany’s Finance Minister Wolfgang Schaeuble earlier last week who continues to emphasise on fiscal discipline and structural reforms across Europe. This was again a key theme in Washington over the weekend with Larry Summers, Christine Lagarde, and Jyrki Katainen all urging for more fiscal flexibility from Germany. A Die Welt lead editorial on Sunday also argued that a weakening German economy should force a policy rethink and warned that Schaeuble's push to achieve a "schwarze Null" (a federal budget that is in the black) in 2015 should not turn into a mindless "fetish". DM developments aside the main EM headlines from Washington was on China. PBOC’s Chief Economist Jun Ma doesn’t see any reason for large-scale fiscal or monetary stimulus “in the foreseeable future” despite China’s slowing growth. He thinks the risk of a hard landing is very low but did note that leverage in certain sectors — including real estate, certain state-owned enterprises and local-government financing vehicles — was already too high, and that further lending to these areas should be avoided. On a similar note, China’s Premier Li reaffirmed during a speech in Hamburg that "China's economy will not suffer a 'hard landing' like some people fear". PBOC’s governor Zhou also re-iterated the party line that the central bank will stick to a prudent monetary policy but also noted that employment is better-than-expected, inflation is relatively low, and expects China GDP to be at about 7.5% this year. Staying on China the latest data overnight were on the encouraging side of things. Both exports (+15.3% yoy v +12.0% yoy expected) and imports (+7.0% yoy v -2.0% yoy expected) grew more than expected in September. The Shanghai Composite is still around a percent lower overnight but off its intraday lows. Indeed it has been a fairly weak session for Asian equities. Bourses are in the red across the board (Hang Seng -0.6%, HSCEI -1.0%, KOSPI -0.8%, ASX 200 -0.8%) following the negative US lead on Friday. Indeed the S&P 500 (-1.15%) fell for its second consecutive day to close at its lowest since May. We are now around 5% off its recent highs of 2011 and hovering just around an interesting technical level namely its 200-day moving average. The S&P 500 Futures (-0.5%) are now trading at around 1884 as we type. Treasuries continue to catch a bid on the back of the risk-off tone with the 10yr closing around 3bps lower at 2.28% (at a YTD low and lowest since June 2013) on Friday (closed for Asian session overnight). In FX, the Dollar is weaker overnight (DXY -0.5%) which did little to support Oil prices. The correction in Oil continues with Brent down 1.3% overnight at US$88.9/bbl (near a four year low). Moving on to today, the risk tone will likely be dictated by the European session as US activity will be very light given the Columbus Day holiday. We have a relatively quiet day for data watchers today but the calendar will pick up tomorrow and beyond with a big focus on inflation numbers amongst other things. Indeed tomorrow will see the release of Germany’s ZEW survey alongside CPI prints from the UK, France and Spain. Wednesday’s data highlights will include the US retail sales for September, the Fed’s Beige Book, CPI readings from China and Germany, US PPI, and the NY Fed Empire State survey. Draghi will speak twice on Wednesday which could also be a source for headlines. On Thursday, we will get Industrial Production stats and the Philly Fed Survey from the US on top of the usual weekly jobless claims. European CPI will also be released on Wednesday. We have the first reading of October’s UofM Consumer Sentiment on Friday along with US building permits/housing starts. Yellen’s speech at the Boston Fed Conference on Friday (entitled “Inequality of Economic Opportunity”) will also be closely followed. Away from the macro events this week, it will also be a busy week for company earnings. We have over 50 S&P 500 companies lined up for quarterly results (nearly a fifth of the index’s market cap). JPMorgan and Citigroup will kick things off for US banks tomorrow followed by BofA on Wednesday, Goldman Sachs on Thursday, and Morgan Stanley on Friday. Away from Financials, we have the likes of Intel, Johnson & Johnson, Google, and GE also reporting this week.