Beige Book

US Futures, Global Markets Storm Higher As More Details Emerge About Japan's "Helicopter Money"

The global meltup continues with the S&P set to open at new all time highs, some 20 points higher from yesterday's close, however the driver for the latest rally is not so much the imminent BOE announcement which is expected to cut rates by 25 bps from 0.50%, but a dramatic surge in the USDJPY just after 1am Eastern when Bloomberg revealed more details about Ben Bernanke's masterplan for Japan's helicopter money.

Fed's Beige Book Repeats "Modest Improvement", No Rate Hike Odds Reaction

The Beige Book offered its ubiquitous modest, moderate, mummified growth outlook with little insight into whether the Fed is considering any rate hike in the immediate future, with the following summary of the Fed's two non-market mandates: "Labor market conditions remained stable as employment continued to grow modestly since the previous report and wage pressures remained modest to moderate. Price pressures remained slight."

Global Stocks, Futures Rise On Disappointing Chinese Trade Data, Hopes For More Central Bank Intervention

In an otherwise quiet overnight session, which among other things saw Germany sell 10Y Bunds with a zero coupon and a negative yield (-0.05%) for the first time ever (despite being uncovered with just €4.038BN sold below the €5.00BN target) anyone hoping for a confirmation that China will be able to prop up the world economy once more, was left disappointed when earlier this morning China reported June exports and imports that once again dropped substantially in dollar terms as soft demand at home and abroad continued to weigh on the world’s largest trading nation.

Key Events In The Coming Week

With the key event of the week flying largely under the radar, which as previewed here last week was Bernanke's visit to Japan which has already led to another global market spike, here are the rest of the week's events.

Goldman Slashes Rate Hike Odds After "Awesomely Bad" Jobs Report

"In light of the weaker-than-expected employment report, we have revised our subjective odds of the timing of the next FOMC rate increase. We now need see probabilities of 0% for June, 40% for July, and 30% for September. Although the report lowers the odds of near-term action, in our view, it also arguably raises the range of possible outcomes. If employment growth rebounds next month but the unemployment rate remains low, the case for hiking after June would become quite strong. Alternatively, if sluggish employment growth were to persist, the FOMC could remain on hold for longer than we currently expect."

Global Markets Flat, Coiled Ahead Of Today's Risk Events: OPEC And The ECB

There are just two drivers setting the pace for today's risk mood: the OPEC meeting in Vienna which started a few hours ago, and the ECB's announcement as well as Mario Draghi's press statement due out just one hour from now. Both are expected to not reveal any major surprises, with OPEC almost certainly unable to implement a production freeze while the ECB is expected to remain on hold and provide some more details on its corporate bond buying program, although there is some modest risk of upside surprise in either case.

July Rate Hike Odds Rise As Beige Book Signals "Tight Job Market", "Modest Growth"

The Beige Book offered its ubiquitous modest, moderate, mummified growth outlook but added a few points that provide The Fed more ammo for hiking rates: Employment grew modestly since the last report, but tight labor markets were widely noted; wages grew modestly, and price pressure grew slightly in most Districts. The reaction was a further rise in July rate-hike odds (and easing of June and September).

Global Stocks, US Futures Slide On Mediocre Manufacturing Data, Yen Surge

Following the latest set of global economic news, most notably a mediocre set of Chinese Official and Caixin PMIs, coupled with a mix of lackluster European manufacturing reports and an abysmal Japanese PMI, European, Asian stocks and U.S. stock index futures have continued yesterday's losses. Oil slips for 4th day, heading for the longest run of declines since April, as OPEC ministers gather in Vienna ahead of a meeting on Thursday to discuss production policy. The biggest winner was the Yen, rising 1%, with the USDJPY tumbling overnight and pushing both the Nikkei 1.6% lower and weighing on US futures.

Futures Flat, Gold Rises On Weaker Dollar As Traders Focus On OPEC, Payrolls

After yesterday's US and UK market holidays which resulted in a session of unchanged global stocks, US futures are largely where they left off Friday, up fractionally, and just under 2,100. Bonds fell as the Federal Reserve moves closer to raising interest rates amid signs inflation is picking up. Oil headed for its longest run of monthly gains in five years, while stocks declined in Europe.

Why This Friday's Payrolls Report Could See A Big Miss

When the main economic event this week hits this Friday at 8:30 am EDT, when the BLS releases the May payrolls report, Wall Street consensus wil be expecting a 160,000 print, a number which will have a big impact on market expectations for a Fed rate hike at the June or July FOMC meeting. However, consensus may be disappointed for one reason: the Verizon strike could chop off as much as 35,000 workers from the headline payrolls print.

Job Openings Back To All Time Highs: Yellen's "Favorite Labor Indicator" Says Its Time To Hike

When last Friday's disappointing payrolls report hit, which saw just 160K jobs added in April, stocks initially tumbled only to surge as the case of a June rate hike was quickly taken off the table. Not only that, but according to Fed Fund futures as of this moment, the Fed won't hike until some time in early 2017. However, one look at the latest JOLTS data, admittedly Janet Yellen's favorite jobs indicator, paints a very different picture.

U.S. Futures Flat After Oil Erases Overnight Losses; Dollar In The Driver's Seat

In another quiet overnight session, the biggest - and unexpected - macro news was the surprise monetary easing by Singapore which as previously reported moved to a 2008 crisis policy response when it adopted a "zero currency appreciation" stance as a result of its trade-based economy grinding to a halt. As Richard Breslow accurately put it, "If you need yet another stark example of the fantasy storytelling we amuse ourselves with, juxtapose today’s Monetary Authority of Singapore policy statement with the storyline that the Asian stock market rally intensified on renewed optimism over the global economy. Singapore is a proxy for trade and economic growth ground to a halt last quarter." The Singapore announcement led to a sharp round of regional currency weakness just as the dollar appears to have bottomed and is rapidly rising.