Yesterday it was the Fed's latest intervention in capital markets, when shortly after yet another ghastly open, the Fed's Bullard added some PPTness to stock when he first said that the Fed "should delay in ending QE", only to backtrack several hours later he was nervous about "staying at zero" and that the Fed is "not too far from its employment goals." Of course, the only thing the algos heard was a delay in QE and following on John Williams' comment earlier in the week, have now reverted to the old central-planning regime where the Fed (and other central banks) will step in the second there is even the smallest market correction, because in the New Normal price discovery is illegal and punishable by breaking markets, such as yesterday's DirectEdge failure at just the right time.

And yet, if the last three days all started with a rout in futures before the US market open only to ramp higher all day, today it may well be the opposite, when shortly after Europe opened it was the ECB's turn to talk stocks higher, when literally within minutes of the European market's open, ECB's Coeure said that:

• COEURE SAYS ECB WILL START WITHIN DAYS TO BUY ASSETS

Which was today's code word for all is clear, and within minutes US futures, which until that moment had languished unchanged, soared by 25 points. So will today be more of the same and whatever early action was directed by the central bankers will be faded into a weekend in which only more bad news can come out of Ebola-land?

Then again, luckily algos have zero sarcasm tolerance because if they were delighted to respond to ECB's "good cop" Coeure, then they would have puked moments after yet another ECB member, Constancio, rejected everything Coeure said:

• CONSTANCIO: CEN BANKS SHOULDN’T BE MARKET MAKERS OF LAST RESORT

One can only smile with a market in which the only thing missing is the central banks' advance report of the EOD closing print. Because fair and efficient went out of the window years ago: case in point yesterday's DirectEdge breaking just as the selling intensified, just to prevent retail from piling into the fray and making the PPT's momentum ignition inflection point impossible. The regulatory approach to "risk" was made even clearer when today Italian authorities took action to stem the downside and prohibit short-selling in Banca
Monte dei Paschi whose shares had been suspended after they struck record lows
yesterday.

But at least thanks to central planner regaining the upper hand in determining the "fair value" of assets, Greece is once again fixed when its 10 Year bond has soared from over 9% yesterday to just barely above 8% today... on absolutely no volume. Clearly, this is nothing but price discovery in its most purest.

In bond land, core Eurozone bond yields have risen alongside equities, with
Germany's 10yr yield rising back toward 0.85% as the IT/GE and SP/GE
yield spread tightens. The German curve trades steeper, with the 2s/30s
wider by over 4bps as the market continues to unwind their heavy
flattening bias observed since the beginning of the week.

In Europe, equities have recovered a small part of the week's losses early doors, with the modest bounce led by peripheral equities driven by the abovementioned halt in Monte Paschi shorting. The energy sector leads the gainers, with the stabilisation of crude prices above USD 82/bbl the primary catalyst, but also hopes of a resolution to the gas row between Russia, the EU and Ukraine - with talks due to be held later today. The FTSE-100's recovery has been stalled by Rolls-Royce Holdings, whose shares fell 8% at the open after cutting their forecast for revenue growth due to deteriorating economic conditions (primarily Russian sanctions). Later today, further US earnings take focus, with General Electric and Morgan Stanley due.

In FX, BoE's Haldane knocked GBP lower halfway through the morning by stating that recent economic data favours a later BoE rate hike, however Haldane also stated that "mid-2015 not a bad bet by the markets", prompting Sep'15, Dec'15 Short-Sterling contracts to fall sharply. In other words, yet another central bank whose only data-dependency is based on the data from the FTSE. On a similar topic, Bank of America have added their name to the slew of firms pushing back their BoE rate rise forecast to Aug 2015 vs. Feb 2015. ECB speakers have hit the wires thick and fast this morning, continuing to highlight the policy tools from the ECB that are yet to come into action (2nd TLTRO tranche, ABS/CB purchases), with little market effect. Overnight, China’s 1y/1y swap rate hit a low of 3.04%, near the PBoC’s deposit rate mark of 3%. As a guide, the last time the rate traded below 3.0% was in 2012, which was also when the PBoC last cut rates (July 12th), the pricing in of Chinese easing helped lift AUD for much of the overnight session.

But the biggest action may be in commodities, where the record oversold WTI and Brent crude futures trade over USD 3/bbl above the week’s lows, with the market taking the opportunity to book profits after the bear-market saw its YTD bottom on Thursday. Spot palladium continues to pare yesterday's losses as the Kremlin state that talks with the EU and Ukraine are difficult, with a large number of misunderstandings and disagreements between all parties. Yesterday, spot palladium fell over USD 27/oz amid USD strength and easing of Russia/Ukraine tensions. Palladium still has another USD 10/oz to gain before erasing yesterday's losses.

On today's docket we have Building Permits and Housing Starts in the US with the first UoM Consumer Confidence print for October will probably the most interesting report on what should be a fairly quiet day for data watchers. And completeing it all will be Janet Yellen who in two hours will speak about... Inequality of Economic Opportunity

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities and German bond yields rise, but remain on track for a weekly loss as sentiment remains fragile – Italian bank shares gain sharply as short-selling bans are put in place to stem the rout
• Energy names lead the gains in Europe as WTI and Brent crude futures trade over USD 3/bbl above the weekly lows on profit-taking and short-covering
• Looking ahead, attention shifts to Fed’s Yellen speaking on inequality at 1330BST/0730CDT, with General Electric and Morgan Stanley also due pre-marke
• Long Treasuries gain for a fifth consecutive week, with 10Y touching lowest since May 2013, 30Y breaking below 3% amid weaker-than-forecast U.S. eco data, concerns over global growth, particularly in euro zone.
• Some schools in Ohio and Texas were closed today after students’ potential exposure to a nurse with Ebola furthered fears of the disease spreading
• The Obama administration sought to deliver a message of reassurance on Ebola while acknowledging lapses in the government’s handling of the first U.S. cases; Obama said he is open to Ebola czar, still opposes travel ban
• Russia’s Putin wants to prevent the Ukrainian war from leading to the frozen conflict he’s maintaining in some former Soviet states, U.K. Prime Minister David Cameron said after a meeting in Milan
• The cost of locking in Chinese borrowing costs is poised to drop below the central bank’s savings benchmark for the first time since 2012 as speculation mounts that interest rates will be cut
• The Bank of Japan’s operation to buy treasury bills from the market fell short of its target for the first time since at least April 2013
• Companies like Apple Inc. and Google Inc. should be required to build surveillance capabilities into their products to help law enforcement with their probes,  according to the Federal Bureau of Investigation
• EU peripheral yields mostly higher. Asian stocks mixed, Nikkei -1.4%, Shanghai -0.7%. European stocks, U.S. equity- index futures gain. Brent crude higher, gold and copper fall

US Data Calendar

• 8:30am: Housing Starts, Sept., est. 1.008m (prior 956k)
  • Housing Starts, m/m, est. 5.4% (prior -14.4%)
  • Building Permits, Sept., est. 1.030m (prior 998K, revised 1.003m)
  • Building Permits, m/m, est. 2.7% (prior -5.6%, revised -5.1%)
• 9:55am: UofMich Confidence, Oct. prelim, est. 84 (prior 84.6)
• 8:30am: Fed’s Yellen speaks in Boston
• No POMO

* * *

DB's Jim Reid concludes the overnight summary:

Non-voting Fed hawk Bullard's comments yesterday versus a week before show how quickly things have changed. On October 9th he said “I think there’s a risk” in holding off on rate hikes until the middle of the year. “We should act on good news. We’ve got a pretty good performing economy. We should be willing to remove some accommodation,” and it would be better to get this process started and not wait too long". However yesterday he said that “Inflation expectations are declining in the U.S.,” he said. “That’s an important consideration for a central bank. And for that reason I think that a logical policy response at this juncture may be to delay the end of the QE.” So he has shifted in a very short space of time from being a Q1 rate hike proponent to one who might want to keep QE alive.

His comments helped turn a market heading towards another mini-meltdown but the intraday volatility was still remarkable. In Europe whilst the Stoxx600, DAX, CAC, IBEX and FTSEMIB closed -0.4%, +0.1%, -0.5%, -1.7% and -1.2% on the day the intraday high-to-low range was much wider at 3.8%, 3.6%, 5.0%, 5.7% and 5.5%, respectively. In the US, the S&P 500 was largely unchanged on the day masking the 2.1% range that we saw throughout the trading session yesterday. With all that volatility came another leg up for VSTOXX and VIX as both closed at their highest since June 2012

Away from equities, higher volatility was also a notable theme in Fixed income markets. The 10yr Treasury yield started the US session at around 2.14%, dipped to a low of 1.976% before climbing back up to a close largely unchanged at around 2.16%. The 10yr German Bund yield dipped to as low as 0.72% before closing back up around the highs of the day of 0.82%. In credit the end of day changes for Xover was also somewhat misleading as index was offered as wide as 424bp before closing 2bp wider on the day at around 404bp.

With eyes on cross asset volatility the trading day yesterday was also supported by some dovish notes from Fed’s Kocherlakota and some better data flow out of the US. Kocherlakota maintained his view that rate hikes any time in 2015 would be inappropriate and was of the view that the Fed can still do more given both employment and inflation are still low. Market seems to agree with that with the Fed Funds contract not pricing in a full rate hike until the first few months of 2016. Data wise we saw better than expected initial jobless claims (264k v 290k), industrial production (+1.0% v +0.4%) and the Philly Fed survey (20.7 v 19.8) although the NAHB Housing market index fell short of consensus (54 v 59).

The recovery from the lows after Bullard spoke yesterday is another reminder how addicted markets still are to liquidity. Indeed in today's pdf we reprint and update a table from our 2014 Outlook showing the various phases of the Fed's balance sheet expansion and pausing over the last 5-6 years and its impact on equities and credit. We have found that the relationship broadly works best with markets pricing in the Fed balance sheet move just under 3 months in advance. We've also included our oft-used chart of the Fed balance sheet vs the S&P 500 to help demonstrate this. So end July / early August 2014 was always the time that this relationship suggested markets should enter a new more difficult phase.

The Fed can certainly help markets but perhaps we really need the ECB to step up a gear for a true recovery. Confirming an earlier media report the ECB yesterday announced that it will reduce the haircuts on Greek collateral submitted by banks in response to recent market weakness. The EC’s Katainen yesterday said that there should be "no doubt that Europe will continue to assist Greece in whatever way is necessary" so the government can keep financing itself. ECB’s Nowotny comments yesterday weren’t as dovish as perhaps the markets were hoping for when he said that he doesn’t think the central bank should pre-commit the amount of ABS it will buy and said market expectations re the volumes were overdone. There is still concern that things have to get worse in Europe before action and on that the periphery was certainly creaking yesterday. Ten year Spanish and Italian Bond yields widened as much as 30bp and 32bps on the day before paring losses to close the day 10bp and 16bp higher, respectively. Greek bonds failed to recover its intraday weakness though with the 10yr bond yield closing 111bp higher near the day’s high of 8.96%.

The Shanghai Composite, Nikkei and the KOSPI are down -1.0%, -0.6% and -1.0%, respectively. Chinese equities were in the green earlier but gave away all of that on concerns that the SH-HK Connect will be delayed. HK officials overnight said that there isn’t a timetable for the program. The S&P 500 Futures (+0.2%) are following the positive lead from the US session yesterday though. Asian credit spreads snapped back after yesterday’s sell-off although sovereign CDS contracts are off the opening tights as we head to print.

In terms of today, Yellen’s scheduled speech aside we have Building Permits and Housing Starts in the US. The first UoM Consumer Confidence print for October will probably the most interesting report on what should be a fairly quiet day for data watchers. US earnings will also continue to feed throughout the day with the Morgan Stanley and General Electric perhaps the two big names to watch.