Breaking The Bank.

In a testament to just how badly this market wants to fade bank earnings, Morgan Stanley’s blowout quarter wasn’t celebrated with anywhere near the enthusiasm the numbers suggested it probably should have been. Of course they didn’t help themselves by effectively jawboning expectations lower just as everyone was talking about how good the quarter was.

“It strikes me that James Gorman and crew are really trying to keep expectations tempered here,” Bloomberg’s Jenny Surane wrote. “First, they note how seasonal the sales and trading business is. They gave a mildly ominous warning on the CCAR test. And now they’re highlighting some of the downsides in the quarter as reasons they’re not raising their return targets.” Aaaaand so:


And the same thing with the banks as a group:


Overall, U.S. equities were flat, although small caps managed to eke out a gain. Treasurys fell, with 10Y yields moving back up towards 2.90:


At one point, 5s30s was inside of 30bp and really, this seems like it’s reaching some kind of tipping point where something snaps:


As Brian Chappatta joked today, Kanye may be in steepeners as he seems to think you’re all being manipulated:

Oh, BTP-bund spread tightest since 2016 and because it would be difficult for me to put it any more succinctly, here’s Bloomberg: “Italian-German 10y yield spread touches lowest level since 2016, as Italy continues to benefit from investors wanting to pick up yield, despite lack of government.” Note that last part: “despite lack of government.” Apparently, you don’t even have to have a government anymore to attract investors, which is a good thing, because God knows America doesn’t have one and we’ve got a lot of debt that needs buying.


The loonie fell after the BoC (on hold, remains cautious):


In related news, Kayla got a scoop today that mercifully didn’t involve Larry Kudlow blowing her a kiss:

The pound plunged as inflation came in soft, slowing to the weakest level in a year last month:


Obviously, that was a boon for the FTSE:


Oil surged (again), this time on extremely bullish inventory data (i.e. draws all around – crude, gasoline, and distillates). WTI topped $68 for the first time since December 2014. Between this and the flare up of geopolitical tensions in the Mideast, this is turning into something of a perfect storm.


Nickel is at a three-year high on jitters about Russia sanctions:


Roku is apparently fucked now that Amazon and Best Buy have partnered on a deal that will see Best Buy become one of the only brick-and-mortar retailers where folks can stride in and buy a Fire-powered TV (Bezos got dat fire, yo). This deal will apparently put built-in Fire TV in Insignia and Toshiba models – Insignias sold at Best Buy used to be enabled with Roku. So much for that Steve Cohen bounce.


Erdogan called for snap elections and while that was bad news on Tuesday when it was tipped, it’s apparently good news now because the date (June 24) is more than two months earlier than what everyone was thinking, which could potentially mean that this all-out push to stimulate the economy (inflation and the lira be damned), could be over sooner rather than later.

To be clear, folks are not optimistic about this because, despite the knee-jerk rally in the currency, just about the last thing the lira needs over the long-term is more Erdogan – he’s the opposite of more cowbell. This is from TD’s Cristian Maggio:

An early vote suggests a faster weakening of the lira, if not immediately then in the second half of the year. Lira probably rallied because investors perceived it would lead to more political stability. I completely disagree. What was the uncertainty before? Was their uncertainty that the AKP and Erdogan would win the next vote, whenever it took place? There was no uncertainty whatsoever. The reality is that you have the AKP in full control of parliament and Erdogan in full control of his party. It should actually be a negative because it should show the market, if there was any need it for it, that the only preoccupation of the ruling party and president is to tighten their grip even more. I don’t see why the market is cheering that.

In case that’s not clear enough for you, there was also this from Commerzbank, suggesting that the more power Erdogan has, the worse off the lira is going to ultimately be:

The lira’s fortunes depend crucially on CBT’s ability to combat the inflation-FX spiral here and now — if this ability is reduced, the implication for the lira is clearly negative.

All of that aside, people were feeling myopic today, and so the lira rallied, as is no eyeing 4.00.


As noted first thing Wednesday morning, it looks like the vaunted “national team” stepped in to arrest a five-day slide in the SHCOMP and to ensure we don’t fall below 3,000:


Meanwhile, bonds surged on the heels of the PBoC’s RRR cut.


Oh, and finally, “Shinzo and Donald make alliance even greater”…



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