If the big hope propelling both ES and S&P cash over 2,000 was the Ukraine-Russian talks, leading to some de-escalation and a thawing of Russian-German conditions, then it was clearly a dud. As the WSJ reports, "face-to-face talks between the Russian and Ukrainian presidents failed to produce a breakthrough for ending the conflict over eastern Ukraine, as Kiev released videos of captured Russian soldiers and rebels pushed toward a government-held city. The one-on-one session, which Ukraine's President Petro Poroshenko described as "tough and complex," ended early Wednesday after a day of talks on the crisis in the Belarusian capital of Minsk. Mr. Poroshenko said afterward that he would prepare a "road map" toward a possible cease-fire with the pro-Russia separatists." In other words, absolutely no progress. There was however escalation, when overnight the September Bund future rose as much as 36 ticks to 151.18, after Poland PM Tusk said “regular” Russian troops are operating in eastern Ukraine. And so we are back to square one, with concerns over Russia pushing European bonds to new record highs, in turn leading to more US Treasury buying, while a brand new rumor of more easing from the ECB, this time by Deutsche Bank, has propped up European equities, which like US futures are trading water around the critical 2000 level.
The Government's Conference Board Consumer Confidence printed an astounding 92.4 - the highest since October 2007 and handily beating expectations of a modest retracement. The headline beat was driven by exuberance in the moment (up from 87.9 to 94.6) as expectations for the future dropped. Plans to buy a home and car rose but major appliances dropped as did expectations for jobs and income. For those in the middle-incomes, things got a lot worse but less-than-$15k and more-than-50k cohorts surged. What is most worrying on an historical basis is the gaping divergence between this government survey and the UMich confidence - near record highs.
- That will teach the UAE who's boss: U.S. Won’t Consult Syria on Militant Strikes: White House (BBG)
- Putin Set to Meet Poroshenko as Ukraine Tensions Escalate (BBG)... but the de-escalation algo?
- Tim Hortons’ Canadian Fans Squeamish of American Hookup (BBG)
- Israeli air strikes target more Gaza high-rises (Reuters)
- How Steve Ballmer Became a Rookie Basketball Mogul (WSJ)
- Buffett to Help Finance Burger King Tax-Saving Deal (BBG)
- U.S. Factories Keep Losing Ground to Global Rivals (WSJ)
- Boehner, Camp Profit From Corporate Bid to Avoid U.S. Tax (BBG)
- Experimental U.S. hypersonic weapon destroyed seconds after launch (Reuters)
- The Neo-Neocons (WSJ)
It is unclear exactly why stock futures, bonds - with European peripheral yields hitting new record lows for the second day in a row - gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the "de-escalation" algo as a meeting between Russia and Ukraine begins today in Belarus' capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn't say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).
Key highlights in the coming week: US Durable Goods, Michigan Conf., Services PMI, PCE, and CPI in Euro area and Japan. Broken down by day: Monday - US Services PMI, New Home Sales (Consensus 4.7%); Singapore CPI; Tuesday - US Durable Goods (consensus 7.5%) and Consumer Confidence; Wednesday - Germany GfK Consumer Confidence; Thursday - US GDP 2Q (2nd est., expect 3.70%, below consensus) and Personal Consumption; Euro area Confidence; CPI in Germany and Spain; Friday - US Michigan Conf. (consensus 80.1), PCE (consensus 0.10%), Chicago PMI; Core CPI in Euro area and Japan (consensus 2.30%). Additionally, with a long weekend in the US coming up, expect volumes into the close of the week to slump below even recent near-record lows observed recently as the CYNKing of the S&P 500 goes into overdrive.
If QE is ending because it was so successful, then why is aggressive forward guidance necessary? If QE worked so well, then why will Yellen likely need to mention ‘the elevated number of part time workers’, ‘under-utilization of labor resources’ or ‘room for improvement in the labor market’? In regard to its inflation mandate, there is no evidence that QE has had any impact other than causing asset price inflation.
Despite Collapsing Economy, Japanese PMI Surges To 5-Month High; China PMI Tumbles, Misses By Most On RecordSubmitted by Tyler Durden on 08/20/2014 21:57 -0400
Following New Zealand's biggest monthly plunge in consumer confidence in over 2 years, Japan's Manufacturing PMI surged to its highest since March at 52.5 (handily beating expectations of 51.5). Almost the entire suite of subindices were positive except JPY weakness-inspired margin compression as output prices tumbled and input prices surged. All of this in the face of collapsing and disappointing hard data. Meanwhile, China Manufacturing PMI plunged to 51.5, missing by the most on record, as China's apparent 'hard' data shows improvement. Perhaps it is time to recalibrate the seasonal magic in these PMIs...
The main event of the week will be Yellen's long awaited speech at the Jackson Hole 3-day symposium taking place August 21-23. The theme of this year's symposium is entitled "Re-Evaluating Labour Market Dynamics" and Yellen is expected to deliver her keynote address on Friday morning US time. Consensus is that she will likely highlight that the alternative measures of labour market slack in evaluating the ongoing significant under-utilisation of labour resources (eg, duration of employment, quit rate in JOLTS data) have yet to normalise relative to 2002-2007 levels. Any sound bite that touches on the debate of cyclical versus structural drivers of labour force participation will also be closely followed. Unlike some of the previous Jackson Hole symposiums, this is probably not one that will serve as a precursor of any monetary policy changes but the tone of Yellen's speech may still have a market impact and set the mood for busier times ahead in September.
Chinese Power Consumption Crashes: Lowest Growth In 16 Months, Tumbles 10% In Shanghai, As Much As 22% ElsewhereSubmitted by Tyler Durden on 08/15/2014 15:02 -0400
When it comes to Chinese (or any other in these centrally-planned, fabricated days) economic data, there is GDP and then there is reality. And as the current premier of China himself has admitted, there is no more accurate indicator of real, not bullshit "growth", than China's monthly power consumption. It is here that another rather massive divergence from China's official data (which has the world believe China GDP rose 7.5% in Q2) has appeared. According to Economic Information Daily, power consumption in Shanghai and Jiangsu fell by more than 10% y/y in July, compared with double-digit growth a year ago, sources said. And it gets worse: other provinces, including Zhejiang, Anhui, Hubei, Hunan and Guizhou, reported a power consumption declines of up to 22 percentage points. One could almost say the Ukraine ministry of YouTube clips has been put in charge of China's GDP calculation.
Unpossible! With stocks at record highs and unemployment plunging (according to the government's data and talking heads), how is it possible that University of Michigan Consumer Confidence has collapsed to its lowest since November, missing extrapolated expectations by the most since 2006? We suspect you know the answer...
Futures Continue Levitation On More "Deescalation" Hopes Despite UK Warning Russia Of "Serious Consequences"Submitted by Tyler Durden on 08/15/2014 07:05 -0400
There were headlines for everyone this morning, but especially for fans of what is increasingly known as Russia's "Schrodinger Invasion" of East Ukraine: one which may or may not be happening depending on i) one's point of view and ii) how one is observing it.
Nearly 80% of Americans have lost faith in the American political system, according to a new Wall Street Journal poll. Despite record highs in stocks (and consumer confidence?) - and a President proclaiming that as victory - 60% of Americans are dissatisfied with the economy and 70% believe the nation is heading in the wrong direction. Who is to blame for this? President Obama's overall approval rating has collapsed to a new low at 40%, with only 42% approving of his handling of the economy. "Americans are cranky, unhappy… It is with everything going on the world," and 57% are pissed off enough to carry a protest sign. But don't worry, as President Obama has reiterated during his tenure, he "will not rest..."
Unlike last week's economic report deluge, this week has virtually no A-grade updates of note, with the key events being Factory Orders (exp. 0.6%), ISM non-mfg (exp. 56.5), Trade balance (Exp. -$44.9 bn), Unit Labor Costs (1.2%) and Wholesale Inventories (0.7%).
The numbers have been 'adjusted' and all is well in the world. Never mind Chicago PMI, or US PMI, the ISM Manufacturing index for July printed 57.1 - the highest since April 2011 - well above expectations and last month's 55.3. Employment rose notably (the opposite of US PMI) and inventories contracted. That's the great news. Then there's the meh news - consumer confidence slipped lower in July. Then there's the horrible news - construction spending collapsed at 1.8% MoM - its biggest drop since Jan 2011. Take your pick which will define your bias.
This week's US data onslaught begins today, with the ADP private payroll report first on deck (Exp. 230K, down from 281K), followed by the number of the day, Q2 GDP, which after Q1's abysmal -2.9%, is expected to increase 3%. Anything less and in the first half the US economy will have contracted, something the purists could claim is equivalent to a recession. The whisper numbers are to the downside since consumption and trade never caught up and the only variable is inventory as well as Obamacare, whose impact was $40 billion "contribution" in Q1 was entirely eliminated and instead led to a deduction, something we expect will be reversed into Q2. Following the backward looking GDP (which will be ignored by the sellside penguins if it is bad and praised if good) at 2:00 pm Yellen Capital LLC comes out with a correction on her call to short social networking stocks, as well as admit once again that the "data-driven" Fed really has no idea what it is doing and how it will tighten, but that tightening is imminent and another $10 billion taper to QE will take place ahead of a full phase out in October. Joking aside, the Fed is expected not to do much if anything, which may be just the right time for Yellen to inject an aggressively hawkish note considering her inflation "noise" refuses to go away.