- Yellen Spending Recipe Lacking Key Ingredient: Bigger Wage Gains (BBG)
- Ukraine signs trade agreement with EU, draws Russian threat (Reuters)
- GM Documents Show Senior Executive Had Role in Switch (WSJ)
- Australian Report Postulates Malaysia Airlines Flight 370 Lost Oxygen (WSJ)
- World’s Biggest Debt Load Lures Distressed Funds to China (BBG)
- GPIF Rushing Into Riskier Assets Before Ready, Okina Says (BBG)
- Japan Prices Rise Most Since ’82 on Tax, Utility Fees (BBG)
- Italian Debt Swells to Rival Germany as Bond Yields Slide (BBG)
- China’s Manhattan Project Marred by Ghost Buildings (BBG)
- BOE's Carney Says Rates Won't Rise to Levels Previously Considered Normal (WSJ)
Abe's honeymoon is over. Following nearly two years of having free reign to crush the Japanese economy with his idiotic monetary and fiscal policies - but, but the Nikkei is up - the market may have finally pulled its head out of its, well, sand, and after last night's abysmal economic data from Japan which saw not only the highest (cost-push) inflation rate since 1982, in everything but wages (hence, zero demand-pull) - after wages dropped for 23 consecutive months, disposable income imploded - but a total collapse in household spending, the USDJPY appears to have finally been dislodged from its rigged resting place just around 102. As a result the 50 pip overnight drop to 101.4 was the biggest drop in over a month. And since the Nikkei is nothing but the USDJPY (same for the S&P), Japan stocks tumbled 1.4%, their biggest drop in weeks, as suddenly the days of the grand Keynesian ninja out of Tokyo appear numbered. Unless Nomura manages to stabilize USDJPY and push it higher, look for the USDJPY to slide back to double digits in the coming weeks.
- Tea Party struggles to repeat Cantor-style shock in Tennessee (Reuters)
- Iran Deploys Forces to Fight al Qaeda-Inspired Militants in Iraq (WSJ)
- Oil Rallies as Militant Advance in Iraq Threatens Crude (BBG)
- Gold Set for First Back-to-Back Weekly Gain Since April (BBG)
- Hedge Funds Get Stung by Slow Markets (WSJ)
- Sterling nears 5-year high after Carney speech (FT)
- Britain Warns Boom in Real-Estate Prices Threatens Economy (WSJ)
- East Europe Leaders Urge EU Unity to Counter Russia (BBG)
- Formula One Said to Be Valued at $8 Billion as Malone Seeks Stake (BBG)
- Dumb and dumber: Abe Plans Company Tax Cut in 2015 as Kuroda Warns on Budget (BBG)
While Japan's Trade balance missed expectations once again (bigger deficit than hoped or expected), the flashing red headlines of the night belong to Japan's 1.6% QoQ GDP print (better than expected) - the 'best growth' since Q3 2011. The initial reaction was JPY weaker, which meant Nikkei higher (and oddly JGBs rallied too). But... and it's a big but... Japanese consumer spending shot up by 2.2% in Q1 - the biggest on record... matched only by Q1 1997, the quarter before Japan's last tax-hike decision. What happened the quarter after that? Take a look...
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.
After April's confidence-inspiring reflexive rebound (thanks to hope for the future more than current perceptions) back near post-crisis highs, it seems the less-than-frigid-weather and record-er highs in stocks were not enough to maintain the status quo enhancing exuberance. UMich confidence dropped and missed expectations by the most since June 2006. Maybe its fears of El Nino? Maybe its concerns at the bond market signals? Or maybe - the reality is that the average joe is not as cock-a-hoop as the man-on-the-TV says he should be. Economic conditions dropped to their lowest since November. Higher highs in stocks and lower highs in confidence - not what the Fed wants.
- Bank of England sees 'no housing bubble' (Independent)
- ‘If the euro falls, Europe falls’ (FT)
- India's pro-business Modi storms to historic election win (Reuters)
- Global Growth Worries Climb (WSJ)
- Bitcoin Foundation hit by resignations over new director (Reuters)
- Blackstone Goes All In After the Flop (WSJ)
- SAC's Steinberg loses bid for insider trading acquittal (Reuters)
- Beats Satan: Republicans Paint Reid as Bogeyman in 2014 Senate Races (BBG)
- Tech Firms, Small Startups Object to Paying for Internet 'Fast Lanes' (WSJ) - but they just provide liquidity
- U.S. Warns Russia of Sanctions as Ukraine Troops Advance (BBG)
- Major U.S. hedge funds sold 'momentum' Internet names in first-quarter (Reuters)
"by July we expect the US economy to be in full recovery from the weather- and inventory-induced slowdown in Q1, and this should push US rates higher and boost the Dollar, including against the Yen." - Goldman Sachs
Just in case you were not convinced what a fragile fallacious lie the entire world's status quo has become, the Bank of Japan just provided one more straw on the camel's back of faith-based investing. As Bloomberg reports, BoJ officials are concerned that cooler-than-normal weather triggered by El Nino this summer will curb spending and weigh on an economic rebound. The Japan Meteorological Agency this week forecast a 70% chance El Nino will occur, the highest since its last occurrence in 2009, bringing lower temperatures that could continue through autumn - and, according to Dai-Ichi, could lower growth by as much as 0.9 percentage points. "We can't rule out the potential that the El Nino this summer causes unexpected damage to Japan’s economy," Nagahama said... the first pre-blamed weather forecast from a central bank we are aware of. Of course, given the dismal retail sales data this morning, we suspect a cooler-than-expected summer will be the scapegoat for a lack of economic escape velocity in the US also.
More stimulus is coming and when combined with rising wages, it should push inflation higher. But this risks a bond market rout.
- Russia raises interest rates to 7.5% (FT)
- Shanghai to Allow Raw Material Exchanges in Trade Zone (BBG)
- US, Japan Fail to Clinch Trade Deal (WSJ)
- 'We don't have a magic wand', says ECB's Constancio (Reuters)
- Tokyo Inflation Quickens to Fastest Since 1992 (BBG)
- Demand for Home Loans Plunges (WSJ)
- EU banks urged to grasp chance to raise capital (FT)
"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.