Following last night's laughable (in light of the slow motion housing train wreck that is taking place, not to mention the concurrent capex spending halt and of course the unwinding rehypothecation scandal) Chinese PMI release by HSBC/Markit (one wonders how much of an allocation Beijing got in the Markit IPO) which obviously sent US equity futures surging to new record highs, it was almost inevitable that the subsequent manufacturing index, that of Europe, would be a disappointment around the board (since it would be less than "optical" to have a manufacturing slowdown everywhere in the world but the US). Sure enough, first France (Mfg PMI 47.8, Exp. 49.5, 49.6; and Services PMI 48.2, Exp. 49.4, Last 49.3) and then Germany (Mfg PMI 52.4, Exp. 52.5, Last 52.2; Services 54.8, Exp. 55.7, Last 56.0), missed soundly, leading to a broad decline in the Eurozone PMIs (Mfg 51.9, Exp. 52.2, Last 52.2; Services 52.8, 53.3, Last 53.2), which meant that the composite PMI tumbled from 53.2 to 52.8: the lowest in 6 months.
So what’s a Peeping Tom, anti-democratic, Constitution-trampling intelligence crony to do after leaving decades of “public service?” Move into the private sector and collect a fat paycheck from Wall Street, naturally. So what is Mr. Alexander charging for his expertise? He’s looking for $1 million per month. Yes, you read that right. That’s the rate that his firm, IronNet Cybersecurity Inc., pitched to Wall Street’s largest lobbying group the Securities Industry and Financial Markets Association (SIFMA)
On the day after Chairman Yellen’s press conference, investors aggressively bid up inflation trades across numerous asset classes. Gold and silver rallied sharply, TIPS implied inflation breakevens widened (despite a new slug of 30-year supply), Treasury yields rose, and the yield curve steepened. Based on investor positioning and market sentiment (CFTC’s Commitment of Traders data show record net short positions exceeding $1.5 trillion in notional rates exposure among speculators in the eurodollar futures markets), there’s decent potential for additional gains in these inflation expressions in the days and weeks ahead.
As of this moment, US equity futures are perfectly unchanged despite what has been an almost comical reactivation of the 102.000 USDJPY tractor beam. Considering the pair has been trading within a 75 pips of the 102.000 level for the past month, one has to wonder when and what the next BOJ Yen equilibrium level will be reset to. Oddly enough, even as the USDJPY is very much unchanged, the Nikkei continues to rise suggesting that, as Nikkei reported, the GPIF is already investing Japanese pension funds in stocks. Which is great for the Nikkei catching up with the global bond bubble, what is not so great is what happens when the market realizes that the largest holder (excluding the BOJ) of JGBs is dumping, and the world's most illiquid major sovereign bond market rushes for the exits. Just recall the daily halts of Japanese bond trading from the summer of 2013 - we give it 3-6 months before it returns with a vengeance.
In what we are sure will be a reassuring hearing full of confirmation that markets are unrigged, safe for investors, and why retail has never had it better, the Permanent Subcommitte on Investigations will start by hearing from IEX's Brad Katusyama who will, as he did before, put them straight on the real actions of the high frequency trading community... Remember the last time HFTs tried to defend themselves... they lied.
After 5 months of missed expectations and tumbling to one-year lows, the NAHB sentiment index jumped 4 points to 49 (still below the 'positive' 50 level). The Northeast - most troubled supposedly by the weather - saw prosepctive buyer traffic drop, but the otheer 3 regions rose with the West spiking. Just as we have seen in the last 2 cycles, NAHB survey data remains far adrift of the reality of sales, but that won't stop the algos extrapolating this jump to new highs and a recovery in housing that is back on...as HANB Chair confirms "is a welcome sign and shows renewed confidence in the industry."
This week brings some key events and releases in DMs, including US FOMC (Goldman expects $10bn tapering, in line with consensus), IP, CPI, and Philly Fed (expect 13.5), EA final May CPI (expect 0.50%), and MP decisions in Norway and Switzerland (expect no change in either).
It's one of those days: despite the Iraq conflict spilling out of control and about to involve US drones and warplanes, despite China's naval conflict with Vietnam over an oil rig in disputed territory set to go "kinetic" at any moment, despite the Ukraine civil war having its deadliest day yet this weekend and adding insult to injury Russia halting gas supplies to Ukraine (letting Kiev and Berlin fight for the scraps), despite crude prices rising ever higher and about to unleash a "discretionary income" shockwave on America's summertime motorists, despite yet another massive tax inversion M&A deal in which the buyer has made abundantly clear its stock is overvalued and will be used as the purchasing currency, stocks are inexplicably not at all time highs this morning.
Today's financial markets make a mockery out of sanity and logic. The difference between what SHOULD happen and what IS happening is perhaps the greatest it has been in our investing lifetimes. If you're perplexed, flummoxed, frustrated, stymied, enraged, bored, irritated, insulted, discouraged -- any or all of these -- by the ever-higher blind grinding of asset prices over the past several years, despite so many structural reasons for concern, you have good reason to be.
Following last month's drop and disappointing miss, University of Michigan Consumer Confidence just got even worse. Despite record high stock prices and near record high car purcahsing exuberance, consumer confidence tumbled for the 2nd month in a row (just when the pent-up demand of Q1 is supposed to kick in). This is the biggest miss of expectations since Dec 2012 and appears to confirm the lack of exuberance seen in the government's survey data. Inflation expectations dropped to the lowest in 2014 as hopes for the economic outlook dropped to 3-month lows. Not the animal-spirity, wealth-creatingy, exuberance the Fed (and every multiple expansion-hoping muppet) was expecting...
With a 9 standard deviation range between the highest and lowest excuse for a forecast from the 81 "qualified" economists on Bloomberg's survey, there is plenty of room for noise to dominate signal with tomorrow's payrolls data. Goldman forecasts a softer-than-consensus 210k increase in non-farm-payrolls as May employment data flow looks more mixed, and they expect that the unemployment rate rose two-tenths to 6.5% in May (vs. consensus 6.4%). Average hourly earnings (AHE) are likely to be in focus again following several months of heightened attention to wage growth and labor market slack; Goldman expects an increase of 0.2% in May (vs. consensus 0.2%).
Two weeks ago we asked, rhetorically, "Whose Housing Bubble Is Bigger?" and showed the April home price increases in the UK and China. Today, we have our answer. As the WSJ reports, "U.K. house prices rose at the fastest monthly pace in almost 12 years and to the highest level since before the global credit crisis in May, a survey showed Thursday, as demand for homes continues to outpace supply despite tougher new mortgage rules."
“We apologize for this error. We have recalculated and confirmed that the actual index indicates that the economy is accelerating,” said Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. “Our research team is analyzing our internal processes to ensure that this doesn’t happen again,” he added.... “We are committed to maintaining the integrity of this report,” Holcomb said. The error resulted when the software incorrectly used the seasonal adjustment factor from the previous month.
This week's busy calendar starts off with today’s global PMIs and ISMs. On Tuesday, President Obama begins a four day European trip ahead of the G7 meeting which starts on Wednesday. This G7 meeting is replacing the G8 meeting that was originally scheduled in Sochi but was cancelled after Russia’s annexation of Crimea. Tuesday’s data docket is important with Euroarea data releases including inflation and unemployment expected to further cement the ECB’s resolve in easing policy come Thursday. Wednesday features the global services ISMs and PMIs. Other data releases scheduled for that day includes the ADP employment report, which will provide an important preview to Friday’s NFP, and US trade. The Fed releases its Beige Book on Wednesday too and the second estimates of Euroarea GDP will be published on Wednesday as well. Apart from the ECB on Thursday, we also have the BoE policy meeting.
May's preliminary UMich confidence print of 81.8 was the biggest miss to expectations in 8 years. In the two weeks since then, the 'economists' have ratcheted back their exuberance to an expectation of 82.5... and still it missed at 81.9. So two weeks of exuberant equity markets have done nothing to soothe the consumer. The Current conditions sub-index tumbled to its lowest since Nov 2013 (and the outlook dropped also). Stock pushers are going to need higher highs if the dream of multiple expansion is to live on....So just as reminder, against the initial expectations, May's consumer confidence missed by the most in 8 years.