Stocks Fail To Soar Despite Global Geopolitical Risk Contagion

It's one of those days: despite the Iraq conflict spilling out of control and about to involve US drones and warplanes, despite China's naval conflict with Vietnam over an oil rig in disputed territory set to go "kinetic" at any moment, despite the Ukraine civil war having its deadliest day yet this weekend and adding insult to injury Russia halting gas supplies to Ukraine (letting Kiev and Berlin fight for the scraps), despite crude prices rising ever higher and about to unleash a "discretionary income" shockwave on America's summertime motorists, despite yet another massive tax inversion M&A deal in which the buyer has made abundantly clear its stock is overvalued and will be used as the purchasing currency, stocks are inexplicably not at all time highs this morning.

Oh wait, we know: it must be because that $29 trillion central banks have quietly invested in stocks and other asset classes is clearly not enough. Expect a few more billion to be promptly injected by central printers into the "unrigged, unmanipulated" policy vehicles whose only purpose is to boost consumer confidence these days, now that only central banks, prop desks and robots are still trading.

The Shanghai Comp (+0.75%) outperformed overnight, benefiting from upbeat comments from China Premier Li, who stated that the government is confident that this year's 7.5% target will be met and also after the PBoC expanded the number of lenders eligible for cuts to their reserve-requirement ratios.

Sentiment remained somewhat cautious in Europe this morning, amid the uncertainty over the recent rise in geopolitical tensions in Iraq and after Russia has reportedly stopped gas supplies to Ukraine after it missed a bill payment deadline. European shares remain lower with the telecom and financial services sectors underperforming and basic resources, health care outperforming. The Spanish and Italian markets are the worst-performing larger bourses, the Swiss the best. The euro is little changed against the dollar. Greek 10yr bond yields rise; French yields decline. Commodities gain, with soybeans, silver underperforming and nickel outperforming. U.S. Empire manufacturing, NAHB housing market index, industrial production, capacity utilization due later.

Market Update

  • S&P 500 futures down 0.3% to 1923.3
  • Stoxx 600 down 0.4% to 345.8
  • US 10Yr yield down 2bps to 2.59%
  • German 10Yr yield down 1bps to 1.35%
  • MSCI Asia Pacific down 0.3% to 143.7
  • Gold spot up 0.3% to $1280.3/oz

EUROPE

  • 3 out of 19 Stoxx 600 sectors rise; basic resources, health care outperform, telcos, financial services underperform
  • 20.2% of Stoxx 600 members gain, 78.7% decline
  • Eurostoxx 50 -0.5%, FTSE 100 -0.2%, CAC 40 -0.4%, DAX -0.2%, IBEX -0.8%, FTSEMIB -0.6%, SMI -0.2%

ASIA

  • Asian stocks fall  with the Shanghai Composite outperforming and the Nikkei underperforming.
  • MSCI Asia Pacific down 0.3% to 143.7
  • Nikkei 225 down 1.1%, Hang Seng down 0.1%, Kospi up 0.1%, Shanghai Composite up 0.7%, ASX up 0.1%, Sensex down 0.1%
  • 3 out of 10 sectors rise with materials, tech outperforming and consumer, industrials underperforming
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