Archive - Aug 25, 2015

The 3-month bounce in the Richmond Fed Manufacturing survey... is dead. From 13 in July, August saw it collapse to 0 (massivley missing expectations of a 10 print). This is the biggest absolute drop in the index since May 2006. Across the board, underlying factors crashed with Shipments plunging, New Orders cliff-diving, order backlogs disappearing and Capacity Utilization plunging. This is exactly what we would expect after a massive inventory build up that was not accompanied by a surge in sales... but the pundits stil proclaim "no signs of an imminent US recession."

The biggest surprise is today's new home sales data was not in the volumes of new homes sold, but the ongoing gaping divergence between volumes and prices. As we have shown previously, this record spread will have to close one way or another, and with the median new home sales price of $285,900 or virtually unchanged from a year ago, it would appear that new home buyers are finally starting to rebel against prices whose rise has far surpassed the increase in actual sales.

Earlier this month whistleblowing platform, WikiLeaks, announced the launch of a new crowdfunding campaign to gain more information on the Transatlantic Trade and Investment Partnership (TTIP). The campaign, launched on August 11, is designed to raise funds to offer whistleblowers a reward for any information about the impending trade, which has been negotiated in almost complete secrecy despite its global implications. To date, the campaign has raised $86,693.47 from 2,441 people, 79 percent of the $109,700 goal.

Hot on the heels of a 22-month low recorded by the latest flash Manufacturing PMI survey, August's preliminary Services PMI was slighlty better than expected but dipped from 55.7 to 55.2 - back towards the lowest levels of 2015. Under the surface things do not look great with New Business Volumes at their weakest since January amd Prices Charged tumbling to the lowest level since June 2013. As Markit notes, "underlying momentum within the U.S. economy had shifted down a gear even before the recent global market turmoil and escalating worries about China’s growth outlook gathered on the horizon."

Stocks remain green but the pre-open surge on the back of a China rate cut has been erased as USDJPY rolls over...

Yesterday's market tumble finally brought the S&P and Nasdaq alongside the Dow Jones into correction territory, send the broader index down 11% from its highs, even as a vast majority of S&P constituents already preceded the index and are either in correction or in bear market territory. And yet, following today's latest central bank intervention, this time in the long overdue Chinese interest rate cut (which will hardly have a lasting impact on either the economy or stock markets), the S&P correction may may prove to be short lived: S&P is poised to open about 4% higher, delivering the latest "Bullard" moment to the S&P, this time courtesy of China. Still, the question remains: was that it for the long overdue correction, and what comes next.

Markets are writing a new storyline...

Precisely 24 hours ago, in an attempt to pre-empt the panic-selling open, the NYSE invoked the little used Rule 48, which was to be expected: the Nasdaq 100 has just tumbled limit down and the S&P and DJIA would follow shortly. Today, however, it is unclear just why the NYSE decided to once again invoke Rule 48 as futures are set to open about 3-4% higher, and yet that is precisely what the NYSE did. As a reminder, what this means is that mandatory opening indications are not required, which in theory should make it easier to open stocks.

Home prices rose 4.97% YoY in June, according to Case-Shiller's 20-City index, missing expectations for the 3rd month in a row. Price appreciation has now been flat for 5 months - despite surging home sales - as bubblicious San Francisco saw price depreciation once again. Portland amd Denver saw the most appreciation in June. This is the second month in a row of sequential seasonally-adjusted declines in home prices, and along with TOL's dismal report this morning, suggests maybe another pillar of the 'strong' US economy meme is being kicked out... and Case-Shiller warn more than one rate hike by The Fed (or a stock market plunge) will stymie housing considerably.

"I have a gut feel the recent wild swings are a precursor of a more insidious trend... which is definitely not going to be our friend!"

Gold appears to have once again anticipated the crisis and is acting like a safe haven in recent days - just at the moment when western investors need a safe haven and wealth preservation most. 

Since we now see the China rate cut exuberance fading fast, we thought it worth reminding 'investors' what is really driving the overnight ramp. It's not the economy, it's The BoJ stupid...

If yesterday's liquidity was bad enough to precipitate the biggest wholesale market flash crash, including the historic, first-ever "limit down" triggers for all major index futures, then be very careful what you do today because as of this moment E-mini liquidity is even worse than it was yesterday, not to mention at any other point in the past month, at this time of the day.