Archive - Dec 3, 2014

While everyone knows Obama's position and stance on everything which is either his way or the potholeway, here is how the other side sees Obama's inability to lead, i.e., reach a consensus. As The Hill reported, Sen. John Cornyn (R-Texas) blasted President Obama for killing a bipartisan tax deal. “The president seems to be positively allergic to compromise and good faith negotiations,” Cornyn said on the Senate floor Tuesday. “His actions are dividing the country.”

Houston, we have a problem-er. With a third of S&P 500 capital expenditure due from the imploding energy sector (and with over 20% of the high-yield market dominated by these names), paying attention to any inflection point in the US oil-producers is critical as they have been gung-ho "unequivocally good" expanders even as oil prices began to fall. So, when Reuters reports a drop of almost 40 percent in new well permits issued across the United States in November, even The Fed's Stan Fischer might start to question his lower oil prices are "a phenomenon that’s making everybody better off," may warrant a rethink. New permits, which indicate what drilling rigs will be doing 60-90 days in the future, showed steep declines for the first time this year across the top three U.S. onshore fields: the Permian Basin and Eagle Ford in Texas and North Dakota's Bakken shale.

Just when industry experts were eying zee stabilittee in oil prices in the last 12 hours, this happens...

*SAUDI ARABIA SAID TO SEE OIL AROUND $60/BARREL: WSJ

And crude oil prices begin to dip once again.

The ongoing slump in oil prices looks set to take their toll on London’s “super prime” property markets with attendant consequences for the rest of the London property market. Foreign money that had been flooding into the UK from a whole array of international sources and parking in London real estate is drying up.

Venezuela CDS is surging once again this morning, even as oil prices stabilize on the day, to its highest since January 2009 as traders increase hedges or speculation that the nation will be forced to default on its bonds. Current prices imply around an 85% chance of default (likely not helped by President Maduro's insistence that all is well and that he will try to destrout the black market for dollars that implies a massive devaluation is afoot for the Bolivar)

The nation's top CEOs trimmed their forecasts for sales and capital spending, according to the Business Roundtable's fourth quarter survey, predicting the economy will grow a modest 2.4% next year (well below the forecasts of many economists who expect the nation's GDP to rise 3% or more in 2015), with only 36% expecting to increase capital spending. Given the roundtable's urging government to extend corporate tax breaks that are set to expire and pass broader corporate tax changes that would encourage companies to invest in the U.S., we look forward to President Obama explaining to the CEOs why they've never had it better...

• SWEDISH PM LOEFVEN SAYS SWEDEN IN SERIOUS SITUATION
• SWEDISH PM LOEFVEN SAYS WON'T ACCEPT NEW POLITICAL SITUATION
• SWEDISH PRIME MINISTER LOEFVEN CALLS FOR NEW ELECTION IN 2015
• SWEDISH PM SAYS NEW ELECTION TO BE HELD ON MARCH 22
• SWEDISH GOVT: WILL NEVER ALLOW SWEDEN DEMS TO DICTATE RULES
• SWEDISH PM LOEFVEN WON'T SEEK ANY FURTHER TALKS WITH OPPOSITION

Confused? You are not alone...

ISM's Nieves: "services in strong uplift in recent months"

Markit's Williamson: "moderating growth in the service sector is a sign of domestic demand weakening... services collectively growing at a much reduced rate"

Trade accordingly...

On the heels of 5 months of weakness in Services PMI, and 2 months of weakness in ISM Services, it only makes sense that ISM's Services print would massively beat expectations at 59.3 (against 57.5). All ISM subindices rose - apart from employment (which dropped to 4 months lows)! Just 15 minutes after one survey indicates a drastic slowdown in domestic demand for services, another one says it has almost never been better...

For the 5th month in a row since the record-breaking June highs that proved the recovery narrative was working, US Services PMI dropped. At 56.2 (missing expectations of 56.5), this is the lowest in 7 months. As Markit notes, this is a problem, since "whereas the manufacturing slowdown was largely linked to weaker global demand and a renewed fall in export orders, moderating growth in the service sector is a sign of domestic demand weakening." This points to a significant slowdown in GDP growth to a mere 2.5% from a hopeful 3.9% in Q3.

Since the top in oil in June, crude has dropped around 37%... and so has the Russian Ruble. Monday saw the Russian Central Bank (rumored) to intervene to protect the 54 Ruble to the USDollar level. Yesterday saw weakness resume as oil prices slipped and today it appears 55 is the new line in the sand as the USDRUB was smashed 2 handles lower earlier today (only to begin selling off once again since). Russian 10Y bond yields are leaking higher however, +20bps to break the 11% line in the sand.

News thats moving markets today

"Almost 40% of appraisers surveyed from Sept. 15 through Nov. 7 reported experiencing pressure to inflate values,...If you thought what was happening before was an embarrassment, wait until the second time around." Is there any price in this economy that isn’t completely rigged?

But all the clever talking heads (the same ones that to-a-man saw rising rates this year) keep telling us that wage inflation is coming any minute, it has to right, and will create escape velocity and nirvana on American soil. Sorry, nope. Unit labor costs dropped 1.0% in Q3 against a 0.3% preliminary print and expectations of a mere 0.2% drop (the 4th missing quarter of th elast 5 and lowest growth since Q4 2013. What is more problematic is real hourly compensation was revised drastically lower - quite a plunge.

Following 2 months of improving growth and beats after a mid-year slump, ADP Employment in November dropped to 208k (from a revised 233k in Oct) missing expectations of 222k by the most since August. November has historically seen a significant bump higher in employment but 2014 saw a drop (the first since 2008) with the lowest November print since 2010.