OVERNIGHT

Last week it was rising oil prices owing to talk about a Russia-Saudi collusion to cut back production.

In early trading overnight in Asia, the WSJ is reporting:

Crude-oil prices fell in early Asia trade Monday, dragged by lackluster Chinese manufacturing data and dimming prospects of a coordinated production cut by world’s dominant oil producers.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at $32.93 a barrel at 0349 GMT, down $0.69 in the Globex electronic session. April Brent crude on London’s ICE Futures exchange fell $0.74 to $35.25 a barrel.

Last week, prices rose on speculation Russia and Saudi Arabia were considering output cuts to support prices. The gains soon evaporated after Organization of the Petroleum Exporting Countries officials refuted such claims.

Hopes of a supply cut sank further after Iran said it “won’t consider a cut” until its exports have increased by 1.5 million barrels a day over current levels of roughly 1.1 million barrels a day.

Here's more about those lackluster Chinese PMI numbers from Business Insider.

The index printed at 49.4, down from 49.7 in December and missing market expectations of a read of 49.6.

It was also the sixth month in succession that the index came in below the 50 level that separates expansion from contraction, and marked the steepest decline in activity seen since August 2012.

As the chart below reveals, the stretch of sub 50 readings is unprecedented.Business Insider Australia

Keeping with the trend established in 2015, the nation’s services sector continued to outperform, although the improvement in activity levels also cooled compared to a month earlier. The NBS’ non-manufacturing PMI gauge fell to 53.5, down on the 54.4 level seen in December.

Meanwhile, Asian markets welcomed February on a cautious note as Reuters noted.



Asian stocks started a new month on a cautious note on Monday, with the Bank of Japan's surprise policy easing sparking some buying but further signs of economic weakness in China and a fall in oil prices keeping investors on guard.

The greenback continued to benefit from the growing monetary policy divergence between the U.S. and its counterparts in Europe and Asia while bonds, especially investment grade debt, received a boost after Japan's surprise decision to introduce negative interest rates last week.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent, after losing 8 percent in January.

Australia and Japan leading regional markets with gains of more than 1 percent each, while Chinese stocks slipped in early trade.
Some are suggesting that Japan's recent surprise move to negative interest rates will buoy equities but only temporarily because at the bottom line it shows just how weak the global economy is and without some stronger demand it will be difficult if not impossible to sustain any meaninbgful rally.

CLUELESS

Well, once again the news is out and spreading. The economy in 4Q showed up with a bad case of mononucleosis if one can believe the data released today. The WSJ reported:

Gross domestic product, a broad measure of economic output,expanded at a 0.7% seasonally adjusted annualized rate in the fourth quarter, the Commerce Department said Friday. The economy had advanced 2% in the third quarter and 3.9% in the second quarter.

Economists surveyed by The Wall Street Journal had expected GDP to grow at a 0.8% pace in the October-to-December span.

Despite weak first and fourth quarters to bookend the year, growth for 2015 as a whole was steady. For the full year, GDP expanded 2.4%, the same as in 2014 and a little better than the 2.1% average since 2010, the first full year after the recession.

The thing you need to remember about these reports is to separate the pessimists from the cheerleaders. The commentators and interpreters about such come in both sizes.  One will find the seemingly good or hopeful, the other the dark side. Chalk it up to human nature. About the best thing,  and the most honest, we can say about this one is what we wrote recently in what-hells-going-on.
The Fed is clueless.

Your weakness is believing that someday everyone will finally discover or needs to discover this fact to validate it.

OVERNIGHT

The stun this time wasn't a gun. It was below zero interest rates and the perpetrator was the Bank of Japan as they unexpectedly cut a benchmark interest rate below zero Friday. It was a move supposedly to protect to protect it's already weak economy from all the recent concern about a global recession and the volatility we've seen since the beginning of the year.

Taking a page from ECB President Mario Draghi, the BOJ essentially played the we-are-prepared-to-do-whatever-it-takes card. As we've said before markets love put options and this is exactly what this move is. As you might expect Asian shares rallied on the news, the yen weakened and bonds moved higher.

What made the bold move so stunning is just last week BOJ Governor said no plan to adopt negative interest rates was in the agenda. the bank's policy board in a 5-4 vote opted to charge a 0.1percent interest on institutional funds held at the BOJ. The Nikkei rallied 2.8%.

In setting negative interest rates, the BOJ is not alone. The WSJ reports: .The central bank is now the second of the world’s major central banks to set negative interest rates, joining the European Central Bank, which first did so in 2014. The central banks of Sweden, Denmark and Switzerland also have negative interest-rate policies.

The Hong Kong Hand Send fishes he'd up 2%, Aussie shares rallied 0.8% and Sourh Korea's Kospi 0.2%.

WHAT THE HELLL'S GOING ON?

People love options, especially if they think they're free.

The options the market loves best, you guessed it, is put options. So yesterday when the Fed failed to give a hint about its future interest rate intentions, many are saying the stock market sold off.

Central bank put options are akin to free lunches. They're quite attractive, but in reality hardly free. Expectations being what they are some will say the Fed failed the economy or is it the economy failed the Fed? That's why we have horse races, football, basketball, baseball games and bookies, at least until they are over-regulated to the bone yard heap.

A Fed that depended on questionable-at-best data for nine years is now being called uncertain, accused  of uncertainty. That's a funny thought. It implies that the Fed actually knows something the rest of us don't. They don't.

The Fed are simply archaic bookkeepers without the green shades.They pour over data, most of it inaccurate to begin with. That's a fool's game, starting with inaccurate data and expecting it somehow to be accurate when one's finished.

Silence is golden, it's been said.The Fed's loud silence, many are now saying, is damning. So where is the Fed today?

An acquaintance of ours loved to tell the story about his attempt to become a major league baseball pitcher. A highly touted rookie, in his first start after giving up five runs and 10 hits in the first inning, his manager finally waddled to the mound, looked him directly in the eye and, his slow southern drawl, said:

"What the hellllll's goin' on?"

UPSET PEOPLE

If you're looking for weak banks, look no further than Europe. Once there, look no further than Italy or Spain, or Greece, or.....

A recent WSJ article, "Banking Troubles Simmer In Italy," notes: "One banker there has gone from respected leader to pariah heckled at church." Can pubic lynchings be far behind?

The article continues about a bank there, a firm nearly 150 years old, was set to open its 1,000th branch this year, instead will close 150 and is likely to be swallowed up by a stronger competitor." That's a 15% if it happens. If the citizens of the globe could get a 15% reduction in the size, waste and corruption of their governments, this whole world financial mess would blow over in the time it takes to utter: "It's about time!"

The Italian proposed solution, the usual one bureaucrats conjure up, comes under the deal-making label. That phraseology alone ought to scare you. The idea of buying assets near market rates that are guaranteed by the government is a dangerous slope. The term government guarantees should frighten you more than the price of oil or China's economic funk.

BRUSSELS—Italy and Brussels struck an agreement Tuesday over a mechanism to deal with the high level of bad loans in the country’s banks, that aims to end uncertainty over the lenders’ health and give a boost Italy’s economic recovery.

However, the lack of detail left it unclear whether the deal would succeed in addressing a problem that has helped provoke a collapse in Italian banking stocks this month.

The Italian government had submitted plans to help banks bundle bad loans in bonds, or securitize them, by being able to sell guarantees to banks that will make some tranches of bad loans less risky.

This would help banks sell them at higher prices and free up their balance sheets, allowing them to make new loans.

Six years after the sovereign-debt crisis first gripped the eurozone, Italy’s banking system is choking. An index of Italian bank shares slumped nearly 25% at the start of this year, during a period when European bank stocks were down 17%, although it partly rebounded last week.

Italian banks are among the Continent’s least profitable, and their books are clogged with €276 billion ($299 billion) of bad loans, more than any other European country, according to the European Banking Authority. Many banks don’t make enough money to write off the poor loans, so they fester—prolonging the mess and making it harder for banks to make loans.

Italy’s struggles underscore the glacial pace of banking overhaul across Europe. Despite years of restructuring, bankers and investors still point to pockets of undercapitalized European banks, which could need to raise up to $35 billion of equity this year, according to Citigroup analysts. Deutsche Bank AG and Austria’s Raiffeisen Bank are among those that bankers and analysts suspect might have to raise capital. A Raiffeisen spokesman said the bank has no plans to do so. A Deutsche Bank spokesman declined to comment.

So just how bad is it for the 78-year-old former respected bank chairman who resigned last November, he has been banned from a half-dozen restaurants and accosted on the street of the small northern Italian community.

We want to remind you again of the recent comment by the billionaire CEO of BlackRock not understanding why people are so upset.

wsj.com/articles/italy-scrambles-to-resuscitate-banks