Archive - Nov 2015 - Story

"The hardest questions we are trying to reconcile here are how is that possible to see all these signs of weakness under the surface being balanced by very strong equity markets and upbeat employment picture. One of these sides has to be wrong..."

Dominated by an 8.7% collapse in The West, existing home sales fell 3.4% in October MoM (worse than the 2.7% drop expected) to a 5.36mm SAAR. Year-over-year, existing home sales are up just 3.9% - the weakest since January. And finally, in a mind-numbing reality for The Fed's wealth creation plan, median home prices have now dropped for 4 months in a row.

Despite EU PMIs surging, US Manufacturing PMI has re-collapsed to 25 month lows as manufacturing employment showed "one of the smallest monthly gains seen over the past five years." The 52.6 print is below October's 54.1 and expectations of 54.0. Export orders saw renewed weakness and overall new orders, output, and employment slowed. Of course, hope remains that the Services side of the economy will maintain the dream of escape velocity but if last month's drop in Services PMI is anything to go by, it seems unlikely.

On November 18, the Chairman and CEO of Guotai Junan went missing, and given what we know about China's crackdown on anyone suspected of engaging in activities that might send stocks lower, you know what that means...

It may be a holiday shortened week in the US with Thanksgiving and Black Friday sales on deck (some of which may be starting as soon as Wednesday) but there is a lot of macro data to digest in the next few days.

National Activity contracted for the 3rd month in a row according to The Chicago Fed's index. Printing -0.04 (missing expectations of +0.05 for the 9th time of the last 11 months), CFNAI has now been below 0 (contraction) for 8 months this year. Under the surface the biggest problem is the collapse in the sales-to-inventories index to cycle lows (contracting 7 of the last 8 months).

Just 2 hours after news broke of Saudi officials discussing the need to do "whatever it takes" to stabilize the oil market - sending crude soaring - half the gains are gone. With the algos tagging Friday's highs, WTI Crude has tumbled back into the red from Friday's close as traders want action not words to solve the massive global oil glut...

Perhaps a retail coals-in-the-stockings Christmas will awaken the mainstream media to the reality that recession is now a global phenomenon.

"Today is a historic day. It’s the changing of an era. We can live in an Argentina without poverty, where we can all aspire to have our own homes with running water and a sewage system." 

"The question is whether this is going to be something like the rebirth of Argentina or another failed dream that people get excited about, but then they can’t overcome the challenges.”

• Brussels on Edge as Lockdown Continues (WSJ)
• Stocks Pare Decline as Crude Oil Erases Drop on Saudi Comments (BBG)
• Italy’s Eni Plans to Pump Arctic Oil, After Others Abandon the Field (WSJ)
• Treasuries Decline as Economists Say GDP to Be Revised Higher (BBG)
• Why the Housing Rebound Hasn’t Lifted the U.S. Economy Much (WSJ)
• Argentina Fever Is Back for Investors as Kirchner Rival Triumphs (BBG)

The oil producers are rapidly learning from the central banks how to jawbone markets higher. With both Brent and WTI sliding as recently as ten minutes ago, suddenly a buying frenzy was unleashed following a Bloomberg headline which cited the Saudi Press Agency, according to which the world's largest crude exporter was ready to pull a Draghi and would do "whatever it takes" for a stable oil market, and that it would cooperate with OPEC and non-OPEC members for stable prices.

As was extensively reported over the weekend, the Pfizer-Allergan tax-inverting, reverse-merger (in which the far smaller Allergan would end up "buying" Pfizer, courtesy of fungible debt which doesn't care where it ends up as long as there are cash flows) would be announced this morning, and sure enough, moments ago the long-awaited press release finally hit.

As a result of the global commodity weakness, global stocks have fallen for the first time in six days as the sell-off in commodities continued, dragging both US equity futures and European stocks lower. However, putting this in context, last week the MSCI All Country World Index posted its biggest weekly gain in six weeks: alas, without a coincident rebound in commodity prices, it will be merely the latest dead cat bounce.

A big catalyst for the ongoing collapse in the Bloomberg commodity index which just hit a fresh 16 year low, is the relentless surge in the dollar, with the DXY rising as high as 99.98 the highest since April, as a result of rising prospects for a December U.S. rake hike (odds are now at 70%, up from 36% a month ago) boosting currency differentials and flows into the USD, making commodities more expensive for buyers in other currencies.

With the ECB expected to announce a boost to QE and pushing rates even lower into record negative territory, perhaps Markit did not get the memo to double seasonally adjust the seasonally adjusted European manufacturing and services PMI survey data, when instead of providing cover for Draghi ("look, the economy is slowing down even more, surely you must unleash more printing") it reported that not only the Manufacturing PMI rose to 52.8 from 52.3, a 19 month high and above the highest estimate (range was 51.5 to 52.6), not only the Service PMI rose to 54.6 from 54.1, a 54 month high and also above the highest estimate (range of 53.5-54.4), but the Composite PMI soared to the highest level recorded since May 2011, rising from 53.9 to 54.4.