- Vietnam, China trade accusations after Vietnamese fishing boat sinks (Reuters)
- SEC Set to Spur Exchange Trading (WSJ)
- Bank of Japan quietly eyes stimulus exit (Reuters)
- Japan Risks Low Growth Even as Easing Spurs Inflation (BBG)
- Hello Japan: Bond Market Message to Fed: Your 4% Rate Outlook Is Too High (BBG)
- Malaysia, UK firm release satellite data on missing MH370 flight (Reuters)
- Fighting rages in eastern Ukraine city, dozens dead (Reuters)
- Bad Credit No Problem as Balance-Sheet Bombs Rally 94% (BBG)
- Draghi’s Asset-Backed Drive Rouses Academic Skeptics (BBG)
- For-Profit Colleges Face Test From State, Federal Officials (WSJ)
The melt up is accelerating and with the momentum tailwind back, newsflow is once again irrelevant: any news that are even remotely good are trumpeted, and any bad news - such as Europe's right storm rising in the northern states, and left storm surge in the states that demand more handouts from the northern states or China sinking a Vietnamese boat, the most serious bilateral incident since 2007 - are once again (and as usual) nothing more than a catalyst for even more liquidity injections. End result: the S&P futures this morning are 5 points above Goldman's year end target of 1900 and 45 points away from its June 30, 2015 target. Can this breakneck scramble on zero volume continue until Grantham's bubble peak level of 2,200 is hit? Well of course: after all anything goes in the centrally-planned new normal. To be sure, this is an equity only phenomenon: moments ago the Bund future hit its highest level since May 19, while the 10 Year remains unchanged at 2.53% as it continues to price in the new "deflationary" (and Japanese) normal. And as has been the case during all such divergences of late, either bonds or equities are making a horrible mistake: the question remains: who? Since all equities are doing is tracking FX pairs to the pip and have completely forgotten all about fundamentals, we have a pretty good idea what the answer is.
This week markets are likely to focus on a few important data prints in DMs, including Philly Fed in the US (expect solid expansionary territory) and 1Q GDP releases in the Euro area (with upside risks). In DMs, the highlights of the week include [on Monday] Japan’s trade balance data and Australia business conditions; [on Tuesday] US retail sales, CPI in Italy and Sweden; [on Wednesday] US PPI, Euro area IP, CPI in France, Germany and Spain; [on Thursday] US Philly Fed, CPI, capacity utilization, Euro area and Japan GDP; and [on Friday] US Univ. of Michigan Confidence. In the US, we expect Philly Fed to print in solidly expansionary territory (at 14, similar to consensus) and to inaugurate what we call the active data period of the month. We also expect CPI inflation to print at 0.3% mom (similar to consensus), and core CPI inflation at 0.18% mom (slightly above consensus).
East Ukraine may be independent in a result which the Kremlin said it "respects" and hopes for a "civilized implementation" of the referendum results, and which assures further military escalation in the proxy war of east versus west, but stocks are happy to ignore it all again. The reason: a positive close over in Asia (ex-Japan) after China’s State Council pledged to reform markets buoyed demand for risk, although it really is just a follow through to the furious VIX slam in the last hour of US Friday trading, which said otherwise, means buying of US equities was the reason to buy US equities. More importantly and adding to the early spoo euphoria were comments by ECB's Nowotny who said that interest rate cut alone would likely be too little to combat low inflation - suggesting a European QE is coming - also acted as a catalyst for the latest uptick in stocks: when trapped like the ECB and when "guiding" to future activity, if unable to actually execute it, may as well go all the way. End result, Spoos up nearly 0.5% because, well, others are buying spoos.
This week, markets are likely to focus on US ISM Nonmanufacturing, services and composite PMIs in the Euro area (expect increases), ECB’s Monetary Policy Decision (expect no change in policy until further ahead), and Congressional testimony by Fed’s Yellen.
- UBS 180K
- HSBC 195K
- Bank of America 215K
- JP Morgan 220K
- Goldman Sachs 220K
- Citigroup 225K
- Deutsche Bank 240K
- Barclays 250K
- Ukraine attacks rebel city, helicopter shot down (Reuters)
- Euro Unemployment Holds Near Record Amid Factory Gains (BBG)
- Yellen’s Fed Resigned to Diminished Growth Expectations (BBG)
- Junket Figure's Disappearance Shakes Macau's Gambling Industry (WSJ)
- China tried to undermine economic report showing its ascendancy (WSJ)
- Liquidity Trap Hitting AAA Bonds Has ATP CEO Sounding Alarm (BBG)
- AstraZeneca Snubs Pfizer Approach That U.K. Won’t Block (BBG)
- Missing Jet Recordings May Have Been 'Edited' (NBC)
- RBS turns corner as first-quarter profit trebles (Reuters)
- Japan household spending hits four-decade high, wages key to outlook (RTRS) while Real Incomes Drop 3.3% in March, 6th straight decline
The consensus for tomorrow's non-farm payrolls print is 218k (and ranges from 155k to 292k across the 94 "economists" surveyed by Bloomberg. Goldman forecasts 220k - around consensus - thanks to the long-awaited full normalization of weather conditions in April which could provide some additional boost. In addition, the employment components of all ten major business surveys released so far improved in April, in each case to a level consistent with increased employment. They expect that the unemployment rate declined to 6.6% in April and a 0.2% increase in average hourly earnings (AHE). Wages will be the object of much attention following a flat read on AHE in March, likely reflecting the unwinding of weather distortions
Since it's not Tuesday (the only day that matters for stocks, of course), call it opposite, or rather stop hunt take out, day. First, it was the BOJ which, as we warned previously, would disappoint and not boost QE (sorry SocGen which had expected an increase in monetization today, and now expects nothing more from the BOJ until year end), which sent the USDJPY sliding, only to see the pair make up all the BOJ announcement losses and then some; and then it was Europe, where first German retail sales cratered, printing at -1.9%, down from 2.0% and on expectations of a 1.7% print, and then Eurozone inflation once again missed estimates, and while rising from the abysmal 0.5% in March printed at only 0.7% - hardly the runaway inflation stuff Draghi is praying for. What happened then: EURUSD tumbled then promptly rebounded a la the flash crash, and at last check was trading near the high of the day.
Housing data weaker than expected? Check. Consumer confidence weaker than expected? Check. New cycle highs in stocks - check, check, and check. Why not - after all, as we noted this morning, what really matters is JPY and the fact that it's Tuesday. The Dow is now practically unchanged year-to-date... but ex-Tuesdays is down over 7%. Despite stocks hitting new highs, treasury yields continue to slide, gold is up, and credit markets are not making new tights. Just remember, when it comes to investing, "it's not the economy, stupid! It's Tuesday.. oh and tomorrow is FOMC."
After March's exuberant surge to the higest level since Jan 2008, serial extrapolators drew their lines and proclaimed that Consumer Confidence would jump further to 83.2 - it didn't. Confidence dropped from a revised 83.9 to 82.3 as Present Situation dropped its most in 15 months. Hope (expectations) remains at its highest in 8 months but plans to buy a car dropped to 1 year lows (with its biggest 2-month drop in 11 years) and plans to buy a major appliance dropped to 5 month lows.
Even Case Shiller itself appears to have given up on housing as the driver of the wealth effect: "Five years into the recovery from the recession, the economy will need to look to gains in consumer spending and business investment more than housing. Long overdue activity in residential construction would be welcome, but is certainly not assured." And looking at actual city level data, we find that just 5 cities saw price increases in February; 13 of 20 cities saw their home prices decline.
- EU regulators unveil details of bank stress tests (FT)
- Just use NSAfari: U.S., UK advise avoiding Internet Explorer until bug fixed (Reuters)
- China’s Income Inequality Surpasses U.S., Posing Risk for Xi (BBG)
- US races to refuel infrastructure fund as revenue dries up (FT)
- New Era Dawns at Nokia as Company Appoints CEO, Plans $1.4 Billion Special Dividend, Share-Repurchase Program (WSJ)
- Obama reassures allies, but doubts over 'pivot' to Asia persist (Reuters)
- Dissent at SEC over bank waivers (FT)
- U.S. Banks to Help Authorities with Tax Evasion Probe (WSJ)
- U.S., Europe Impose New Sanctions on Russia (WSJ)
- Why the U.S. Is Targeting the Business Empire of a Putin Ally (BBG)
- Euro-Area April Economic Confidence Unexpectedly Declines (BBG)
- Bitcoin traders settle class actions over failed Mt. Gox exchange (Reut
If one needed a flurry of "worse than expected" macro data to "explain" why European bourses and US futures are up, one got them: first with UK Q1 GDP printing at 0.8%, below the expected 0.9%, then German consumer prices falling 0.1% in April, and finally with Spanish unemployment actually rising from a revised 25.73% to 25.93%, above the 25.85% expected. All of this was "good enough" to allow Italy to price its latest batch of 10 Year paper at a yield of 3.22%, the lowest yield on record! Either way, something else had to catalyze what is shaping up as another 0.5% move higher in US stocks and that something is the old standby, the USDJPY, which ramped higher just before the European open and then ramped some more when European stocks opened for trading. Look for at least one or two more USDJPY momentum ignition moments at specific intervals before US stocks open for trading. But all of that is moot. Remember - the biggest catalyst of what promises to be the latest buying panic rampathon is simple: it's Tuesday (oh, and the $2-$2.5 billion POMO won't hurt).