Archive - Sep 2010

Another ridiculous market reaction following the ADP read today, when the AUDJPY initially dropped, only to see every deranged Japanese housewife, and anyone else with an FX account plough into it taking full advantage of 50x+ leverage to spook remaining weak short hands out. The catalyst: good news is good news, bad news is better news, as, just like Bank of America which just threw in the towel (more in a post momentarily), any incremental economic snapshot now means either more QE by the Fed or more QE by the Fed (and other CBs). We are back to the regime where dollar weakness is good for risk (especially beta>5.0 risk, meaning all the empty chatterboxes whose only strategy is to lever up on beta and pray will be out in full force on CNBC today). Incidentally, just as we expected, and right on cue, the Hungarian central bank said that the surging CHF poses "risks from the aspect of Hungarian economy's growth prospects, and that the weakening HUFCHF is causing higher than expected loan losses in bank sector." Define zero sum.

A weak seasonally adjusted PMI number out of China did nothing, as expected, for Chinese stocks, but was enough to push US futures up an entire point overnight, as any data now is enough to send the computers into a feeding frenzy. Additionally the trend of declining European data continues, with an even starker contrast between core and the periphery: EU PMI came in at 55.1 compared to 56.7 previously and the lowest since February 2010, yet what is interesting is that German PMI came on top of expectations (and again the lowest since february at 58.2), while Italy missed by a mile at 52.8 on expectations of some growth from the previous print of 54.5. As for Greece - forget about it: its PMI was 43, compared to 45.3 in July, on steep falls in output and new orders, as austerity continues to extract its pound of flesh. Yet it is all about the AUDJPY, which at least up until the completely worthless and irrelevant ADP report came in at -10,000 on expectations of +17,000 (and, gee, the previous was again revised lower from 42k to 37k, hopefully this is not an indicator of what to expect this Friday, as this was the first decrease in private payrolls since January 2010) was up by about 150 pips. So why is the AUDJPY flying? In addition to some better than expected Aussie GDP data, which is nothing but a second derivative on the Chinese economy, one should actually ask the forward looking question: what is really going on in China? And here is Goldman explaining why the Chinese PMI number, despite what Doug Kass would like to tweet, actually confirms an ongoing slow down in mainland China.

• Asian stocks rise on China manufacturing, Australia's growth; Yen weakens.
• Australian economic growth accelerates more than estimates; Currency gains.
• China's manufacturing expands at faster pace in Aug - rises to 51.7 from 51.2.
• Currency trading tops $4 trillion a day as dollar's share drops, BIS says.
• FDIC finds more than a tenth of U.S. banks - 829 - at risk.
• Pennsylvania's capital of Harrisburg to skip a $3.29M payment on its debt.
• Treasuries decline as Asian stocks advance, US to announce auction size.
• US consumer confidence rose just 2.5 points in August, to 53.5.

Today's key economic data releases. As Ed McKelvey says, "Lots going on today, beginning with some labor market indicators, then industrial and construction data, then Fed speeches punctuated by reports from vehicle manufacturers."

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 01/09/10