Archive - Oct 22, 2015 - Story

Missing expectations for the 3rd month in a row, US Lesading Economic Indicators (LEI) dropped 0.2% MoM. There has not been a bigger monthly drop since March 2013. Ironmically, initial jobless claims (which we have recently explained is now useless) was the largest positive contributor (after the yield curve steepness) but stock prices, average workweek, and building permits weighed heaviest.

Since February, Americans have become less and less confident about the economic future of the country. As Bloomberg reports, National Economy Expectations tumbled to 42.0 - just above Sept 2014 lows and almost as weak as during the 2013 government shutdown. 2015's weakening streak is the worst consistent drop since 2011 (which unleashed moar QE) as Americans' spending attitudes tumble the most since May.

In one of the most-watched hearings in historuy on Capitol Hill, former Secretary of State Hillary Clinton faces one of the biggest tests of her career – not to mention her presidential campaign – as she testifies before the Select Committee on Benghazi in the House of Representatives. This, of course, is not the first time, but one wonders if she will come out swinging with her "what difference does it make" persona, or be buried in the minutia of her private email server. As WSJ notes, the national response to the attacks that killed four Americans in Benghazi on Sept. 11, 2012, was complicated by secrecy, tragedy and national politics... and the people still want answers.

Moments ago the US Treasury promptly removed any latent optimism that this latest debt ceiling crisis will somehow be magically fixed on its own after it announced that it would postpone the two-year note auction previously scheduled for Tuesday, as the impasse over the debt limit constrains the nation’s borrowing. “Due to debt ceiling constraints, there is a risk that Treasury would not be able to settle the two-year note”

Bitcoin has recovered all the losses from the volatility surrounding China's currency devaluation and Black Monday equity weakness as implicit capital controls drive the Chinese into alternative currencies (as we warned would happen). However, the last few days have seen the cryptocurrency surge to $280 - the highest in 12 weeks - as The EU's top court ruled bitcoin and other virtual currencies can be exchanged tax-free, putting them on a more equal footing with traditional cash.

Surprise! A central banker promises moar of the same... and once again the goldfish-like-memory of market particpants forgets that this has all been priced in a thousand times and buys his bullshit. EUR dumped 150 pips to a 1.11 handle, 2Y German notes tumbled 6bps to -32bps, European and US stocks are surging (as USDJPY rises) and US Treasuries have reversed early gains amid equity gains.

With a very modest rise from -0.39 to -0.37, The Chicago Fed National Activity Index is holding at its lowest since January 2014's weather-blamed collapse. September's negative print is the 7th (of 9) this year, the worst grouping since 2012. For the first time since June, the 3-month average (which most watch) has dropped negative again. This merely confirms the six-out-of-six regional fed surveys that shout recession.

Having hit new 42-year  lows last week, initial jobless claims once again beat expectations but rose very modestly from a revised 256k to 259k this week. This continues to diverge drastically from Challenger job cuts data, from weakening payrolls data, and from collapsing ISM survey employment indicators... so who is lying?

Update: DRAGHI SAYS ECB DISCUSSED A FURTHER LOWERING OF DEPOSIT RATE

Draghi hints at December QE expansion, noting that "the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting." 

As long as politicians and media keep talking about disinflation and central bank inflation targets, and all they talk actually about is consumer prices, we will all fail to acknowledge what’s happening right before our very eyes. That is, the system is imploding. Deflating. Deleveraging. And before that is done, there can and will be no recovery. Indeed, this current trend has a very long way to go down. So far down that you will have a very hard time recognizing the world, and its economic system, on the other side of the process. But then again, you have a hard time recognizing the world for what it is on this side as well.

We hoped yesterday's preview would soften the blow from today's CAT Q3 earnings which were clearly going to be ugly, and surely worse than consensus estimates. Moments ago we got said earnings and as expected, they were indeed far worse than expected, with CAT reporting adjusted EPS of $0.75 ($0.62 GAAP), below consensus estimate of $0.77, while revenue of $11.0 billion also missed expectations of $11.33.This takes place even as CAT repurchased $1.5 billion in stock in Q3, or about 75% of the total $2.0 billion in buybacks it conducted in all of 2015 (compared to $8 billion in the past three years).

At today’s meeting, which was held in Malta, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.30% and -0.20% respectively.

• ECB Haunted by Paradox as Draghi Weighs Risk of QE Signaling (BBG)
• At odds with Republicans, Hillary Clinton to testify on Benghazi (Reuters)
• House tees up conservative plans to raise debt limit (Hill)
• U.S., Russia to Meet at Syria Conference to Discuss Crisis (WSJ)
• Putin Gains Record Support Among Russians Over Syria, Poll Shows (BBG)
• China Plans 2020 Deadline for Dismantling Capital Controls (BBG)
• Nyrstar Drops the Most on Record as Mining Hit by Metal Rout (BBG)

After yesterday's dramatic late day market rout catalyzed by the tumble in the biotech sector in general, and Valeant in particular, and foreseen in its entirety by Gartman who went bullish just hours before, this morning US equity futures and European stocks have recouped some losses on the recursive, and traditional, hope that Mario Draghi will say something to push risk higher when he speaks in 2 hours at the ECB's press conference in Malta. And yet, just like Yellen a month ago, Draghi faces the paradox of reflexivity that after years of being ignored, is the "new thing" in town: how does he intervene and demonstrate he is readier than ever to set up stimulus, without panicking investors over euro area’s health.