Archive - Aug 26, 2013

Over six weeks ago we first noted that there were problems with the industry-specific data underlying the Chinese PMI numbers when we added that "the random disappearance of data was disorienting." Fast-forward to last week and the greater-than-50 PMI print heard around the world, which provided just enough momentum ignition to warrant more optimism in world equity markets that the second-half of the year would indeed prove to be a mythical renaissance. Well, it turns out that China's official National Bureau of Statistics has admitted that "we can’t ensure all industry-specific data can reach accuracy requirements," adding that they "were concerned that some of the numbers may affect related investors and users." Translation - the data in some industries was so bad that by telling the truth, our data would have become viciously self-fulfilling for their demise. The Juncker-rule is alive and well...

... Although if one has trouble finding an upward inflection point in this chart showing the annual change in actual shipments (not cancelable orders) of non-defense capital goods excluding aircraft, we understand.

When you add High Frequency Trading exchange 263 and  High Frequency Trading exchange 264 (read all about DirectEdge over the years here), you get a whole lot of happy algos. It also means that MtGox is on its way to becoming the world's most stable exchange. We now expect the market to crash in celebration. We joke, of course, but if anyone trips over the BATS extension cord that sends AAPL under $500 and the NYSE Arca and NASDAQ shutting down again, we take no responsibility. Finally, in continuing the spirit of full transparency and openness of everything HFT-related, the terms of the transaction will not be disclosed.

The equity market seems to have shrugged off the bad-news-is-good-news meme and is deathly quiet. However, in bonds, FX, and commodity markets, things are escalating in a 'Taper-off' manner...

And so that the great CapEx spending surge is delayed once more: supposedly to H3 2013 this time. Moments ago the Commerce Department reported the latest Durable Goods numbers which were a total disaster: the headline print plunged by 7.3% on expectations of a -4.0% decline driven by a drop in Airplane orders (to be expected following last month's noted bumper Paris Air show spike as Boeing reported only 90 new plane orders compared to 273 in June). Well, airplanes orders did indeed slide by 52.3%, but it was weakness in Transportation (-19.4%) and Computer (-19.9%) orders as well as Manufacturing (-9.8%) that took the market by surprise. This was the biggest miss to expectations since August 2012.

The last time Italy was close to a full out collapse was in November 2011 when ECB's then-recently appointed new head Mario Draghi forced Berlusconi out following an (ECB uncontrolled) plunge in Italy bonds. It is only fitting that following Bunga Bunga's latest tax fraud conviction, and the resulting power circus, it is Sylvio who threatens Italy's government, and stability, once again.

A quiet week to send off August ahead of a deluge of key data next week and as the fateful Septembr 18 FOMC announcement approaches. Still, quite a few macro events to keep track of.

• Bankers Brace for Fed Wind-Down (WSJ)
• A Veteran Saudi Power Player Works To Build Support to Topple Assad (WSJ)
• Gunmen shoot at weapons experts' vehicle in Damascus: U.N (Reuters) - as long as it's not drones
• ECB Council Members Split in Jackson Hole Over Rate Cuts (BBG)
• Fed Officials Rebuff Coordination Calls as QE Taper Looms (BBG)
• As Egyptians Ignore Curfew, Talk of a U.S.-Brotherhood Conspiracy (NYT)
• Pipeline-Capacity Squeeze Reroutes Crude Oil (WSJ)
• Lawmakers Probe Willful Abuses of Power by NSA Analysts (BBG)
• Indictments Expected in Alleged Trading Code Theft (WSJ)
• India’s ONGC takes Africa gasfield stake (FT)
• Capital Flight Drains Reserves as Rupee, Rupiah Fall (BBG)
• Banks scale back rates business (FT)

Last week it was the Nasdaq, today it was the Eurex Exchange, which broke down "due to technical issues" shortly after 2 am Eastern and which was offline for over an hour. Further keeping a lid on liquidity and upward momentum is today's UK market holiday which has resulted in a driftless move lower across European stocks, following a red close in the Nikkei225. It only means that the inevitable ramp up in the disconnected from all fundamentals and reality market will have to come only during US trading hours when the NY Fed trading desk steps up its POMO-aided levitation.