So what happens to a market that’s balanced precariously atop the shares of a handful of “must own” companies when those companies lose their halos? Historically, the previously-strong sectors join the rest in a broad sell-off.
"Today, Russian Su-34 fighter-bombers have made their first sortie equipped not only with high explosive aviation bombs and hollow charge bombs, but also with short- and medium-range air-to-air missiles The planes are equipped with missiles for defensive purposes."
Following Milwaukee Fed weakness, Dallas Fed Manufacturing printed -4.9 (better than expectations of -10 and up from October's -12.7). This is the 11th monthly contraction (sub-50) in the index, something not seen outside of a recession. Prices paid and received tumbled, wages dropped and new orders contracted once again but number of employees and average workweek both jumped? Despite all the promises from former Dallas Fed Fisher, it appears the economy is not so diversified after all.
As goes Ford, so goes America?
We were told that low oil prices were unequivocally good for America, so it's odd that, after seeing the weakest growth in pending home sales since Nov 2014, NAR blames "softness in sales on oil-related job losses from low oil prices." Pending home sales grew 2.1% YoY in October, (way below the 4.3% expected growth and 3.2% growth in September).
One month ago, the Chicago PMI soared, printing at 56.2, far above the highest estimate. It was not meant to be, and printing moments ago at 48.7, a mirror image of last month, as this time it printed below the lowest estimate of 49, with consensus expected a 54.0 print. And confirming that that US is indeed in a manufacturing recession is the starting fact that the PMI has been below 50 (shrinking) for more months in 2015 (6) than it has been above this expansionary threshold.
"The idea of lettting an asset bubble run is literally one of the most foolish things a central bank can do... they always end badly;"
Are the "globalization gloves" finally coming off?
For the 10th month in the last 12, Milwaukee's ISM missed expectations. After bouncing hopefully off 6-year lows in October, November saw weakness return with a plunge in New Orders and weakness in employment (even as exports supposedly soared). This is the 8th straight month of contraction (sub-50) in the survey.
Faced with a sharp deterioration in government finances, the Saudis have resorted to tapping the bond market and delaying contractor payments in an effort to avoid further depletion of the kingdom's SAMA reserves. Now, Saudi banks are bleeding private and public sector deposits, while interbank rates have spiked the most since 2008.
As noted earlier, after last week's snoozefest, this week starts off with a bang when the IMF announces in a few hours it will accept the Chinese Yuan in the pantheon of world reserve currencies alongside the USD, EUR, GBP and JPY the only question being what the alotted weighing of the currency will be. Things then progress to tomorrow's global PMI numbers, Yellen speeches on the economy to the Economic Club of Washington and Congress (Weds/Thurs), the eagerly anticipated ECB meeting on Thursday and finally Friday's OPEC meeting and US payroll print - the last before the FOMC in 2 weeks time.
"All global events have been reduced to monetary policy events, i.e., buy the dip opportunities. France’s CAC-40 sold off the two trading days before the recent horror. It was a solid buy the following Monday. By always protecting risk-takers, the authorities are complicit in trivializing issues that need an all hands on-deck response. Bad news is good news has metastasized into an even baser concept"
"We think that the equities risk-reward will be less attractive than it was in the past few years. We reduce our equities OW in a balanced portfolio to a minimal one, at 5% vs benchmark, the lowest we have had since the current upcycle started. The long period of indiscriminately buying any dip might be coming to an end."
Late last year, Japanese PM Shinzo Abe effectively forced the $1.1 trillion Government Pension Investment Fund to double its domestic equity allocation. With Kuroda providing perpetual Nikkei plunge protection, and with Abenomics set to bring about an economic renaissance, what could possibly go wrong?...
- Dollar rises versus euro, oil drops before ECB, OPEC meetings (Reuters)
- Smog chokes Chinese, Indian capitals as climate talks begin (Reuters)
- Obama: COP21 Paris Climate Talks Could Be ‘Turning Point’ For Planet (BBG)
- China plans to launch carbon-tracking satellites into space (Reuters)
- Scientists Dispute 2-Degree Model Guiding Climate Talks (WSJ)
- At NATO, Turkey defiant over downing of Russian jet (Reuters)
- ECB Left With No Choice But Action After Draghi's Priming (BBG)