Archive - Jul 2015

Following Construction Spending's exuberant 2.2% MoM surge in April (revised to 2.1), May saw a fall-back-to-earth 0.8% gain (still better than expected). However, while Markit's Manufacturing survey tumbled, ISM's rose in May and now in June picked up again to 53.5 - its highest since January. Employment rose notably but New orders were only marginally higher and Production slowed. Rather stunningly, all the improvment in ISM is seasonal adjustments with the non-seasonally-adjusted data at its lowest since January. The question remains, is this good news enough to warrant a September rate cut - if we ignore everything else that is weak?

US Manufacturing PMI's final print for June at 53.6 (slightly above its preliminary 53.4 print) is its lowest since October 2013. The survey has fallen almost non-stop since the end of QE3. Under the covers, data was mixed, softer output growth was offset by a slight pick-up in the pace of new business gains and job creation, but Manufacturers indicated a slowdown in production growth for the third month running during June. As Markit's echief economist notes, “Policymakers will be concerned about the unbalanced nature of growth, and in particular the loss of export and investment drivers, and will want to see growth pick up again in coming months before committing to higher interest rates.”

As we await Tsipras' response to reports which indicate he is set to concede to creditors' proposals in exchange for a deal that rescues his country from the brink of economic oblivion, Barclays and Bloomberg are out with referendum roadmaps.

Just when you think things can’t get any crazier, they always do. The Guardian reports on unpublished Troika documents that show Greece is only too right in asking for debt relief. That for the Syriza government to sign what the Troika wants to force them to sign would see Tsipras et al plunge their country into a financial hell hole.

As the shortened week continues ahead of tomorrow's payrolls print, and amid chaotic Greek headline-hockey, ADP and Challenger jobs data gives us a glimpse of what volatility lies ahead. After jumping a little last month, but remaining in weak territory, ADP printed 237k for June (beating expectations of +217.5k) in line with estimates for nonfarm payrolls. This is the best print since Dec 2014 but is dominated by small businesses with large companies lagging.  Job gains were dominated by Services (+225k) with goods-producing fiorms gaining a mere 12k jobs. This comes after Challenger-Gray showed job cuts increasing 42.7% YoY in June and are at the highest level for June since 2009.

In the latest example of the soaring cost of living in America, Manhattan apartment prices just hit a record, with average sale prices soaring 11% to an astounding $1.87 million in Q2, the highest in the quarter or so century of record keeping.

The market may be scratching its head over the outcome of this Sunday's Greek referendum, soaring on the faintest trace of good news such as the report of Tsirpas' capitulation this morning then reluctantly selling off as the euphoria is rejected, but for the bookies the outcome is now clear: earlier today Ireland's Paddy Power announced it has "paid out five figures" in winnings to gamblers who bet that Greece will back a July 5 austerity referendum that may seal the nation’s future as part of the euro region.

The same thing others are thinking...

As Greece prepares to accept creditors' terms in exchange for a deal, German Chancellor Angela Merkel addresses parliament. Here are the key points. 

• Tsipras backs down on many Greece bailout demands (FT)
• Creditors skeptical of Tsipras' offer (Reuters)
• Greek Pension Rationing Begins; Poll Shows Tsipras Backed (BBG)
• Greek referendum poll shows lead for 'No' vote, but narrowing (Reuters)
• Greek Bank Controls Heap More Pain on Crisis-Weary Citizens (BBG)
• Greek Crisis Ripples Across European Companies as Markets Swing (BBG)
• China Stocks Fall: Shanghai Composite Index Drops 5.2% (BBG)
• China June factory, services surveys fuel hopes economy leveling out (Reuters)
• Some Chinese Are Taking 22% Margin Loans to Finance Stock Purchases (BBG)

So much going on that by the time an article is prepared, everything has changed and it has to be scarpped. But, in any event, here is an attempt to summarize all that has happened in another turbulent overnight session.

Greek PM #Tsipras to address the nation shortly #Greece

— Kathimerini English (@ekathimerini) July 1, 2015

It's deja vu all over again.

Just hours after Greece became the first developed country to default to the IMF, as a result being expelled from its existing bailout program, a little before 5am CET news hit that Greek PM Tsipras was willing to concede to virtually all creditor demands, with a few exceptions. As the FT first reported, "Greek prime minister Alexis Tsipras will accept most of the bailout creditors’ conditions offered last weekend, but is still insisting on a handful of changes that could thwart a deal according to a letter he sent late on Tuesday night."

But what I was seeing was a central bank that I thought was doing the wrong thing, always backstopping markets and that was under Chairman Greenspan at the time. And I saw that it was leading to, in my area, in technology, the greatest stock market bubble that I'd ever seen. 

The EU is blowing up itself by trying to exert far too much influence on the very member nations that made its existence possible. Brussels is a blind city. It will take a lot of pain, and probably even the very wars the EU was originally founded to prevent, to figuratively burn it to the ground.