When the bubble vision stock peddlers get desperate, they talk decoupling. So by the end of yesterday’s bloodbath you would have thought China was on another planet, and that “commodities” were some trinket-like collectibles gathered by people who don’t wear long pants, drink coca cola or jabber on their cell phones. On these fine shores, of course, its all awesome from sea to shinning sea. So don’t be troubled. Buy the dip.
Mario Draghi and the ECB have a habit of patting themselves on the back when it comes to what they imagine the happy outcomes of their monetary policy decisions have been. In fact, they have a habit of congratulating themselves on positive outcomes even before said outcomes have been observed or have even had time to play out. This time around unfortunately, "the failure looks clear."
Oil Triple Whammy: Inventory Build, Iran Nuke Deal Has Votes, & China Gives Venezuela $5 Billion LoanSubmitted by Tyler Durden on 09/02/2015 - 10:38
Following last night's epic inventory build., according to API, DOE has reported a 4.7mm barrel build but US crude production pluinged 1.4% (lowest since March). However, ths oil complexc has been hit by two other 'issues' this morning as Obama captures the votes he needs to confirm the Iran nuclear deal (guaranteeing more oil supply) and China encumbers more Venezuelan oil ($5bn loan) allowing them to keep pumping at below-cost levels. The reaction for now is notable selling pressure...
After last Friday’s GDP print which confirmed that Brazil slid into recession during Q2 - a quarter in which Brazilians suffered through the worst inflation-growth outcome in at least a decade - and after July’s budget data which confirmed that the country’s fiscal situation is a veritable nightmare, we got a look at industrial production today and boy, oh boy was it bad. So bad in fact, that it missed even the lowest analyst estimate.
US Manufacturers saw new orders rise at a modest 0.4% in July (missing expectations of a 0.9%). However, year-over-year Factory Orders crashed 14.7% (thanks in large part to last year's Boeing order dropping out of the cycle). But even ex-Transports, New orders tumbled 0.6% in July and plunged 6.9% YoY. This is the 9th month in a row of YoY drops and is without doubt signalling an imminent US recession...
Europe's refugee crisis just took a dramatic turn for the worse, and strikes at the very hear of Europe's Shengen customs union which has allowed borderless travel within Europe for decades. As Bloomberg reports, the Italian Province of Bolzano in Northern Italy said in a statement that it agreed with the Italian government on request by German Federal State of Bavaria by "communicating a willingness to restore border controls at Brenner and temporarily suspend the Schengen agreement."
By turning the health of the economy into a reflection of the stock market, the Status Quo has made the stock market into the one bellwether that matters. In effect, the stock market is now integral to the economy as a measure of sentiment and evidence that all is well with the economy as a whole.
If there is one thing more or less guaranteed to create a bullish scenario for stocks, it is the sudden flip-flop of world-renowned newsletter writer Dennis Gartman once again to a short-of-stocks position. Worse still, his fellow newsletter writers, according to AAII, have not been this 'unbullish' since the trough in March 2009. Of course, what many are missing this morning isd 120 points of The Dow's gains are due to the panic-intervention by The BoJ at last night's Japan open...
Unit Labor Costs dropped 1.4% in Q2, missing expectations of a 1.2% drop and falling to the lowest since Q2 2014. Despite all the sound and fury and wage growth looming any minute now... it is not! This is the first consecutive drop in unit labor costs since Q4 2008.
The global economy’s finance based spine is so out of whack that it is in need of a major readjustment. Cash or better yet “near cash” such as 1-2 year corporate bonds are my best idea of appropriate risks/reward investments. The reward is not much, but as Will Rogers once said during the Great Depression – “I’m not so much concerned about the return on my money as the return of my money.”
Following its disapppointing tumble in July (having missed expectations for 6 of the last 7 months), August ADP printed another miss at 190k against expectations of a 200k rise with last month revised lower. As the energy sectyoir continues to bleed jobs at a rate of 10k per month, ADP's Zandi notes that manufacturing jobs growth is all auto-related (which is extremely worryinmg given the size of inventories). Job groiwth was largely driven by small businesses (85k) as opposed to large business (40k) with Service-producing goods drastically outpacing manufacturing job growth (173k to 17k).
"One of the biggest problems we face is that there is no historical template for current global market conditions so we’re all flying blind to a large degree. Never before have so many of the most important countries in the world printed so much money and left base rates at near zero for so long. Also never before has the largest economy in the world tried to start a slow process of reversing said extraordinary policy. So there is no road map for this journey, only educated (hopefully) predictions."
RANSQUAWK PREVIEW VIDEO: ECB September'15 Rate Decision: The ECB are expected to leave all three rates unchanged, with focus turning to...Submitted by RANSquawk Video on 09/02/2015 - 07:55
- All surveyed analysts expect the ECB to keep their three key interest rates unchanged
- A number of analysts have suggested that inflation rhetoric could be downbeat and further QE is a possibility later this year, as such any potential indication to this by Draghi is likely to take centre stage at the press conference
- The central bank are said to be concerned by inflation expectations, with low energy prices and recent EUR strength raising concerns about the central bank’s mandated 2% inflation target
As Deutsche Bank put it on Tuesday, we've officially reached the end of the "Great Accumulation" as slumping Chinese growth, plunging crude, and an imminent Fed hike have put enormous pressure on emerging economies’ accumulated stash of FX reserves and that means that buyers of USD assets are becoming sellers at the expense of global liquidity and the perpetual bid for some core paper. Now, Goldman has weighed in, noting that the rise in foreign FX reserves held by non-G-7 countries that started around 2003-04 (at around US$1trn) appears to have ended for good.
- Markets on edge as policymakers flex muscles (Reuters)
- European shares recover from rough ride (Reuters)
- For Stock Markets, the Moment When Humans Matter (WSJ)
- Puerto Rico's PREPA, bondholders have framework for deal (Reuters)
- Hundreds of migrants protest at Budapest station, want to go to Germany (Reuters)
- New Whale Seen Moving Tokyo Markets (BBG)