Consumer Confidence

Frontrunning: May 2

  • 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

Goldman Expects "Solid" Payrolls Due To "Long Awaited Full Normalization Of Weather Effect"

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

Stock Ramp Algos Confused On "Lack Of Tuesday", Cautious On Upcoming Fed Announcement

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.

"It's Not The Economy, Stupid; It's Tuesday"

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."

Consumer Confidence Misses; Present Situation Tumbles Most In 15 Months

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.

Case-Shiller Has Longest Home Price Decline Stretch Since 2012; 13 Of 20 Cities See Price Drops

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.

Frontrunning: April 29

  • 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

Overnight Levitation Is Back Courtesy of Yen Carry

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).

Key Events In The Coming Very Busy Week

The coming week will be busy in terms of data releases in the US; highlights include an improvement in consumer confidence, anemic 1Q GDP growth, and solid non-farm payrolls (consensus expects 215K). Wednesday brings advanced 1Q GDP - consensus expected a pathetic 1.1% qoq, on the back of what Goldman scapegoats as "weather distortions and an inventory investment drag", personal consumption (consensus 1.9%), and FOMC (the meeting is not associated with economic projections or a press conference). Thursday brings PCE Core (consensus 0.20%). Friday brings non-farm payrolls (consensus of 215K) and unemployment (6.6%). Other indicators for the week include pending home sales, S&P/Case Shiller home price index, Chicago PMI, ADP employment, personal income/spending, and hourly earnings.

Futures' Pharma M&A Euphoria Fizzling As Ukraine Reality Takes Hold

The early session risk on trade, which materialized after the Pfizer confirmation it was seeking to buy AstraZeneca, and which sent the GBPUSD to its highest level since 2009, and also sent the EURUSD and EURJPY soaring in the process lifting US equity futures, has started to fizzle on the most recent news out of Ukraine, where the pro-Russian mayor of Ukraine's second largest city of Kharkiv was shot in the back in an apparent assassination attempt, which happened hours before the US is set to announce more sanctions against the Kremlin and its closest financial oligarchs.  As a result, futures have pared gaisn modestly, especially since AstraZeneca made it clear with its initial reponse it has no interest in Pfizer's offer in its current format.

Consumer Confidence Collapses In Japan

"Japan’s consumer confidence fell in March to the lowest level since August 2011..." This is a worst fall than the nation suffered during the Tsunami and the fastest fall since 2009. Abe has no choice now, get long Depends...

Japan To Downgrade Economic Assessment In April, So More BOJ QE Right? (Spoiler Alert: No)

Moments ago the Nikkei strategically leaked a report that the Japanese cabinet office, quite expectedly, will downgrade its economic assessment in its April report. "Expected" because as we reported, discretionary spending following the  sales tax hike, has gotten crushed. Also not unexpected, the USDJPY took the news in stride and posted a modestly bounce in the face of today's relentless selling of the pair. Why? Because to algos and many asset managers desperate for more training wheels from central banks (now that everyone has forgotten how to trade based soely on fundamentals), this means more QE from the BOJ right - after all horrible news for everyone is great news for the 1%.

Not so fast.

European Stocks Tumble As Investors Rush Into "Safe Haven" Italian Bonds!?

Consumer confidence slumps in the core and Ukraine fears weighed heavily on European stocks despite getting a push from the insanity in US equity markets this morning. Europe closed at their lows of the day led by Italy and Portugal stocks fading fast. It would appear that these worried investors greatly rotated into safe-havens such as Italian government bonds - which broke to their lowest yield on record today... makes sense right?