Consumer Confidence

Every quarter ConvergEx's Nick Colas reviews a raft of unusual and less examined datasets with an eye to refining and adding perspective to the more traditional macroeconomic analyses. This quarter’s assessment of everything from large pickup truck and firearms sales to Google search autofills for “I want to buy/sell” shows a U.S. economy that is reasonably strong but growing only very slowly. The chief areas of concern: Food Stamp participation is still very high at 45.6 million Americans (14% of the total population) and indicators like used car prices and large pickup sales are flat.

As Gallup's Consumer Confidence plunges, The Conference Board's Consumer Confidence explodes higher from 94.6 to 101.4 (smashing expectations of 97.4). After missing by the most in 5 years in April, higher gas prices, market instability, and growing social unrest appear to be the perfect recipe for improved consumer confidence as The Conference Board data nears the highest since 2007. The biggest driver of the headline spike is the surge in "expectations" - in other words, hope - which jumped from 86.2 to 94.6, although expectations for higher incomes finally began to drop back to reality.

The Greek D-(efault) day has arrived, and with it so has quarter-end window dressing for many underwater hedge funds (recall the S&P is now red for the 2015) which means the rumor mill today will be off the charts. And sure enough, less than an hour ago, futures exploded higher as did the EURUSD, following another "report/rumor" of a last minute detente between Greece and the Troika when Greek Ekahtimerini said that  "Tsipras is reconsidering the last-ditch offer made by European Commission President Jean-Claude Juncker, sources have told Kathimerini."

At the open, Europe looked in the abyss, and with no help coming from China, it did not like what it saw: And then the answer came from the Swiss National Bank, which stepped in to prevent the collapse just as Europe was opening. Because seemingly out of nowhere, a tremendous bid came in to life the EURCHF, buying Euros (against the CHF and the USD) and selling Europe's last left safety currency. We now know that it was the SNB, the same central bank which is the proud owner of well over $1 billion in Apple stock.

UMich consumer sentiment spiked from 90.7 to 96.1 (well above the 94.6 preliminary print) just shy of 2015 highs (which are also the highest since 2004). The spike is driven by a surge in "Current Conditions" as hope for the future rose only modestly as inflation expectations dropped. However, notably fewer people see now as a good time to buy a house. We assume UMich survey respondents are "invested" in stocks since higher gas prices and lower affordability in housing seemed to weigh Gallup's economic confidence down to its lowest since 2014.

Following yesterday's furious market drop in Chinese stocks, just before the overnight open, Morgan Stanley came out with a much distributed report urging investors "Not to buy this dip", and so they didn't. As a result, the Shanghai Composite imploded, at one point trading down 8% while the Chinext and Shenzhen markets crashed even more. This was the single biggest Shanghai Composite one-day drop since 2007, and with a close at 4192.87 the SHCOMP is now on the verge of a bear market, down 19% from its June 12 highs. China's second largest market, Shenzhen, is now officially in a bear market.

Chaos reigns, with contradictory headlines pushing and pulling futures in any one direction, only for the next headline to undo the previous one. And only headline scanning frontrunning algos have any chance of trading any of this...

• Greece Handed New Terms as Tsipras Approaches Decision Time (BBG)
• As U.S. Probes $12.7 Trillion Treasury Market, Trader Talk Is a Good Place to Start (BBG)
• Signs Swedish QE Backfiring as Liquidity Evaporates (BBG)
• ECB approves ELA funding requested by Greece- banking source (Reuters)
• Greek Millennials Can't Find Work But Actually Want to Keep the Euro (BBG)
• Greek deal or not, the euro is now a different beast (Reuters)
• Promoter’s Arrest Sheds Light on Cynk’s $6 Billion Surge (BBG)
• The World's Biggest Economies Are About to Feel the Impact of China's Slowdown (BBG)
• Senate Clears Trade Bill’s Way to Passage (WSJ)

Before taking a look at Europe, an update on China. Just a few short hours ago, when looking at the bursting of the Chinese bubble where stocks were down between 3% and 5% across the board in the first post-holiday trading session after the worst week in 7 years, we said that "without assistance (levitation) from the same PBOC that just clamped down on liquidity, the China bubble has burst." And then as if by request, minutes later we got, drumroll, levitation and the stickiest stick-save by the PBOC seen in months, when the Shanghai Composite staged an unprecedented 7% surge from the lows to close 2.2% higher after tumbling as much as 5% earlier in the session. And just like that, faith in the "wealth effect" is preserved.

today is Friday taken to the n^th degree, with the markets having already declared if not victory then the death of all Greek "contagion" leverage, following news that a new Greek proposal was sent yesterday (which as we summarized does not include any of the demanded by the Troika pension cuts), ignoring news that Greece had again sent Belgium the wrong proposal which the market has taken as a sign of capitulation by Tsipras, and as a result futures are surging higher by nearly 1%, the German DAX is up a whopping 3.1%, on track for the biggest one day gain in three years, Greek stocks up over 8%, German and US Treasurys sliding while Greek and peripheral bonds are surging.

Just a few months ago, we warned Brazil's economy was on the verge of collapse as the fiscal situation was deteriorating rapidly. It appears, judging by the most recent data from the oil-rich nation, that we were right. Broad retail sales have now declined for five consecutive months with the seasonally adjusted broad retail sales index now at the same level as early 2012. Core retail sales declined 3.5% YoY during April (weakest print since Aug 2003) and broad retail sales declined by an even larger 8.5% YoY (lowest on record), and as Goldman warns, the outlook for private consumption and retail sales in the near term remains very weak.

While there were key macroeconomic data out of Asia earlier in the session, with Japan revising its Q1 GDP up from 2.4% to 3.9% (due to an upward revision to capex) making some wonder if it simply didn't snow in Japan this winter, as well as Chinese trade data that was once again disappointing with the third consecutive drop in exports coupled with an 18.1% collapse in imports hinting that nothing is going well in China's economy (which once again sent stocks soaring this time up another 2.2% on certainty another PBOC rate cut is imminent, pushing the PBOC to a fresh 7-year high of 5,132), it was actually a leaked Obama comment on the strong USD that moved markets.

June is off with a bang, and a very busy week in the macro economic calendar, both globally and in the US, which culminates with the latest "most important ever" payrolls report, one which will surely be closely watched by a Fed which may hike as soon as a few weeks from now (but probably won't).

Following the collapse in Gallup's consumer confidence and Bloomberg's Consumer Comfort, UMich Consumer Senitment printed 90.7 (against expectations of a rise to 89.5 from 95.9). With May's preliminary print the biggest miss in 17 months, this final drop leaves Consumer Sentiment at its lowest since November 2014. Hope dropped from 88.8 to 84.2 but it was the collapse in Current conditions - which fell from 107 to 100.8 - that crushed the headline. This is the biggest plunge in current conditions since Summer 2011 (the US debt downgrade). Business expectations plunged to 8-month lows, employment expectations tumbled... but the number who think it's a good time to buy a house rose.