"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...
- Sensitive Market Data Leaked After Government Phone Call (WSJ)
- This is a actual Bloomberg headline: China Fake Data to Skew More Export Numbers (BBG)
- This is another actual BBG headline: U.S. as Global Growth Engine Putt-Putts Instead of Purring (BBG)
- Ukraine wants to buy European gas to boost energy security (Reuters)
- JPMorgan Profit Falls 19% on Trading, Mortgage Declines (BBG)
- Record Europe Dividends Keep $2.8 Trillion From Factories (BBG)
- Why is Goldman shutting down Sigma X: SEC eyes test that may lead to shift away from 'dark pools' (Reuters)
- Ebola Outbreak Empties Hotels as West Africa Borders Closed (BBG)
- Australian PM says searchers confident of position of MH370's black boxes (Reuters)
- Gross Says El-Erian Should Explain Reason for Exit (BBG)
After a selloff as violent as that of last night, usually the overnight liftathon crew does a great job of recovering a substantial portion of the losses. Not this time, which coupled with the sudden and quite furious breakdown on market structure, leads us to believe that something has changed rather dramatically if preserving investor confidence is not the paramount issue on the mind of the NY Fed trading desk. Nikkei 225 (-2.38%) suffered its worst week since March'11 amid broad based risk off sentiment following on from a lower close on Wall St. where the Nasdaq Biotech index suffered its largest intra-day decline since August 2011. Negative sentiment carried over into European session, with stocks lower across the board (Eurostoxx50 -1.17%) and tech under performing in a continuation of the recent sector weakness seen in the US. JP Morgan (JPM) due to report earnings at 7:00AM EDT and Wells Fargo (WFC) at 8:00Am EDT.
There is a reasonably quiet start to the week before we head into the highlights of the week including the start of US reporting season tomorrow, FOMC minutes on Wednesday and IMF meetings in Washington on Friday. On the schedule for today central bank officials from the ECB including Mersch, Weidmann and Constancio will be speaking. The Fed’s Bullard speaks today, and no doubt there will be interest in his comments from last week suggesting that the Fed will hike rates in early 2015.
- Crimea Resolution Backed by U.S. Barely Gets UN Majority (BBG)
- Russian Buildup Stokes Worries (WSJ)
- As reported here first: China’s Developers Face Shakeout as Easy Money Ends (BBG)
- U.S. House Poised to Clear Sanctions Called Putin Warning (BBG)
- Bitcoin Prices Plunge on Report PBOC Orders Accounts Shut (BBG)
- Search for lost Malaysian jet shifts significantly after new lead (Reuters)
- Russian fund taps China and Middle East (FT)
- Long battle looms between U.S. college, athletes seeking to unionize (Reuters)
- Official warns EU-US trade deal at risk over investor cases (FT)
- New iPhone likely out in September, Nikkei daily says (AFP)
It would appear that pending wars in Europe, freezing snow storms (and droughts) in the US, and Asian credit concerns have finaly taken their toll on US consumer confidence. At 79.9 relative to an expectation of 82.2 this is the biggest miss since Dec 2012 and lowest since Nov 2013.Current conditions rose modestly but the economic outlook fell by its most in 5 months. UMich confidence remains notably below the July 2013 peak levels (which correspond quite coincidentally to the same 4 year 4 month cycle we have seen in the prior 2 cycles) despite stocks have made higher highs since then as the decoupling remains in place.
- Ukraine anxiety triggers flight to safety, stocks tumble (Reuters)
- Woodrow Wilson’s Ukraine Failure Foreshadows West’s Dilemmas (BBG)
- Fortress Executives Join Peers Selling Stock After Rally (BBG)
- 303 Deaths Seen in G.M. Cars With Failed Air Bags (NYT)
- Putin Deports Executives for Speeding as Sanctions Loom (BBG)
- Russia blocks internet sites of Putin critics (Reuters)
- China Bond Risk Exceeds Ireland as Defaults Unavoidable (BBG)
- China H-Shares Post Biggest Weekly Drop Since October (BBG)
- Surge in Rail Shipments of Oil Sidetracks Other Industries (WSJ)
- Blackstone’s Home Buying Binge Ends as Prices Surge (BBG)
This week brings a slew of central bank meetings: At the forefront will be the BOJ meeting on Tuesday where no changes to monetary policy are expected. However, we will be watching the commentary closely for hints to further monetary easing in the coming months. Goldman, and others, still expect the BOJ to provide additional stimulus in the second quarter of this year as the impact of the consumption tax hike on the economy becomes visible - it is that expectation that sent the USDJPY above 100 in late 2013 and any disappointment by the BOJ will certainly have an adverse impact on the all important Yen carry pair. In terms of the key data to watch this week, the themes of recent weeks remain the same: US activity data, with retail sales and the U. Michigan Consumer sentiment survey the main releases, European inflation trends (French and German HCPI data on Thursday and Friday, respectively), and finally external balances in EM. Within that group, the latest data points for trade and current account balances in India, Turkey and South Africa will receive the most attention.
Despite fresh record highs for stocks, previously exuberant Conference Board consumer confidence was unable to make new highs and instead tumbled by the most in 4 months, missing expectations by the most since October. This catches down to Bloomberg's less confident consumer and suggests the hopes and dreams of a nation looking for moar multiple expansion may be drifting away...
While the only fun-durr-mentals that matter appear to be global central bank liquidity injections (and thus the level of leverage entrusted to the JPY carry trade), the crowd is swayed by truthisms and "common knowledge" memes that recovery is here, that things are improving, that earnings are 'solid', that markets are still cheap, and that historical analogs are different this time. However, with monetary policy at a turning point, we also appear (fundamentally and technically) to be at "the inflection point from self-reinforcing speculation to fragile instability."
Take your pick of which "confidence" measure you choose to watch to confirm your previous "common knowledge" meme. Unsurprisingly, the government's own Conference Board indicator provides the highest level of confidence relative to recent months but today's beat by UMich (81.2 flat from last month but above 80.2 expectations) is the highest overall level among the indices. It seems not even the weather can dampen the enthusiasm of the US consumer (who is retail spending at a dismally low level?) Hardly surprising is the fact that the tumble in the current conditions index was entirely dissolved by the hope for the economic outlook which stands at 6 month highs! Short-dated inflation expectations also ticked up. Of course what really matters is keeping the dream alive that multiple-expanding confidence will cover up any and all missed expectations in macro and micro data.
The most notable event in this traditionally quiet post-payrolls week is Janet Yellen's Humphrey Hawkins testimony before Congress set for mid-week. In terms of economic data releases, the US retail sales (Exp. 0.05%) is on Thursday and consumer sentiment survey is on Friday (consensus 80.5). We also have IP numbers from Euro Area countries and the US. Most recent external account statistics are released from Japan, China, India and Turkey. It is also interesting to track CPI data in Germany, Spain and India, given the ECB and RBI currently face diverging inflation challenges and may be forced into further action. Finally, we have Q4 GDP data from the Euro Area economies (Friday).
After Friday's surge fest on weaker than expected news - perhaps expecting a tapering of the taper despite everyone screaming from the rooftops the Fed will never adjust monetary policy based on snowfall levels - overnight the carry trade drifted lower and pulled the correlated US equity markets down with it. Why? Who knows - after Friday's choreographed performance it is once again clear there is no connection between newsflow, fundamentals and what various algos decide to do. So (lack of) reasons aside, following a mainly positive close in Asia which was simply catching up to the US exuberance from Friday, European equities have followed suit and traded higher from the get-go with the consumer goods sector leading the way after being boosted by Nestle and L'Oreal shares who were seen higher after reports that Nestle is looking at ways to reduce its USD 30bln stake in L'Oreal. The tech sector is also seeing outperformance following reports that Nokia and HTC have signed a patent and technology pact; all patent litigation between companies is dismissed. Elsewhere, the utilities sector is being put under pressure after reports that UK Energy Secretary Ed Davey urged industry watchdog Ofgem to examine the profits being made by the big six energy companies through supplying gas, saying that Centrica's British Gas arm is too profitable.
BOTTOM LINE: The January employment report contained a confusing set of data, as payroll job growth significantly disappointed, but the unemployment rate declined by one-tenth, reflecting large gains in household employment. Overall we see the report as slightly weaker than expected. Nonfarm payroll employment rose a disappointing 113k in January (vs. consensus +180k). By industry, retail trade declined 13k (vs. +63k in December), while health and education services?normally a consistent support for headline job growth?declined for the second consecutive month (-6k). Construction employment, which declined 22k in December amid adverse weather, added 48k, suggesting little negative weather impact in the January report. Government employment fell 29k, the worst performance since October 2012, split between federal (-12k) and state and local (-17k). Payroll job growth in November and December was revised by a cumulative 34k, consistent with the general tendency for positive back-revisions in the January report. Over the past three months, payroll employment rose an average rate of 154k per month.