For the first time since November 2014, Cushing saw an inventory decline (-514k) last week. This has promopted a spike up to yesterday's highs in WTI Crude. The total inventgory build was 1.9mm bbl (less than the expected 3.2mm bbl) but continues the record streak to 16 weeks.
Update: Bonds and gold have reversed gains, stocks legged lower and Dollar is rebounding
It appears bad news is not great news when it comes to GDP. Having missed consensus by a mile, GDP's weakness has sparked a more 'normal' reaction across asset classes for now. Weakness in the dollar and stocks along with bond yields tumbling (10Y back under 2.00%) and strength in precioius metals. Crude is uncaring for now.
Today we get a two-for-one algo kneejerk special, first with the Q1 GDP release due out at 8:30 am which will confirm that for the second year in a row the US economy barely grew (or maybe contracted depending on the Obamacare contribution) in the first quarter, followed by the last pre-June FOMC statement, in which we will find out whether Janet Yellen and her entourage of central planning academics will blame the recent weakness on the weather and West Coast port strikes and proceed with their plan of hiking rates in June (or September, though unclear which year), just so they can push the economy into a full blown recession and launch QE4.
Against expectations of a 3.3mm bbl build, API reported a 4.2mm bbl build - the 16th weekly build in a row (and record streak). Cushing saw a small draw of 162k bbls. WTI Crude fell back below $57...
The sudden closure of Corinthian Colleges' remaining campuses has displaced some 16,000 students. If all of their student debt is canceled — which is possible — it will cost taxpayers more than $200 million. With the government cracking down on the for-profit education space and with nearly 90% of students at for profit-colleges dependent on loans, the demise of the for-profit model could end up costing taxpayers quite a pretty penny.
Update 2: Curiously, while we were confident Iran would deny the report first, it was in fact the US: US NAVY DENIES CONFRONTATION WITH IRANIAN MILITARY: CNBC
Update: WHITE HOUSE REFERS COMMENT ON IRAN SHIP CAPTURE TO DEFENSE DEPT
Moments ago according to Saudi-owned Arabiya news, Iranian forces have seized a US cargo ship, which has some 34 American sailors, which they have taken to the port of Bandar Abbas. Iran's Farsnews confirms the Arabiya report, stating that "a US cargo ship with 34 crew was stopped and seized by Iranian Navy warships on Tuesday. The Iranian Navy has confiscated the American trade vessel with all its 34 crew for trespassing on Iran's territorial waters in the Persian Gulf."
Overnight we got the latest proof that there is nothing worse for an economy than to be run by a bunch of central planning academics who get "advice" from Paul Krugman. The reason: Japan's retail sales which crashed by 9.7% Y/Y, the biggest annual drop in history. To be sure, the biggest reason for the annual drop was the base effect with the surge in demand last March ahead of the April 2014 consumption tax hike, but the drop was bigger than what consensus had expected, as expectations were for a -7.3% drop. And confirming that things are getting worse on a sequential basis as well, was the 1.9% drop in sales in March compared to a 0.7% increase in February. In fact, as the chart belows show, on an indexed basis, the March retail sales print was one of the worst since last year's tax hike.
- Maryland Governor Calls in National Guard to Control Baltimore Riots (BBG)
- Fed Seen Delaying Liftoff to September to Push Down Unemployment (BBG)
- Nepal PM says toll could rise to 10,000 (Reuters)
- China Readies Fresh Easing to Tackle Specter of Debt (WSJ)
- ‘Damned Lies’ Threaten to Overshadow U.K. GDP in Election Fight (BBG)
- Uncertainty Over Impact of a Default by Greece (NYT)
- Why the Cost of Hedging European Banks Stocks Has Soared (BBG)
- Carinthia cash crunch gives Austria its own mini-Greece (Reuters)
Following yesterday's early MNI rumor that a Chinese QE is being "considered" and which sent the Shanghai Composite surging 3% and led to an initial boost in US stock futures, overnight the PBOC scrambled to once again deny such speculation. Of course, going full "cold Turkey" on Chinese stimulus would be too much for the market to handle, so in a piece by the WSJ also released overnight, the author said the PBOC would pivot from outright QE to mere LTRO, which is also not new and was reported over a week ago here in "China Floats QE Trial Balloon, PBoC May Launch LTROs." In any event, for now at least, Asian stocks are not happy despite Apple's latest blockbuster results, and neither is Europe, with the Stoxx 600 down 1%, and even the E-mini is hugging 2100 unable to levitate on any imminent central bank intervention.
For 6 months, investors have been buying the idea - pitched by any and every status-quo-sustaining talking head, politician, and central banker - that low oil prices are unequivocally good for America. This has manifested itself in retail stocks handily outperforming the S&P. However, as Bloomberg notes, the last few weeks has seen that reverse dramatically as it appears investors, losing faith in the big-takers, have realized that "consumers aren't spending as much of the money saved from lower gasoline prices."
Dollar weakness continues (after weak US Services PMI) which has sent stocks to new record highs but it is the China-QE-driven commodity complex (along with Aussie and Canadian Dollar) that is in outright vertical panic mode...
It appears the 'containment' of Greek FinMin Varoufakis has sparked exuberance in Greek bond markets. 10Y GGB yields are down over 60bps (and 3Y -275bps!) on the news. The machines appear to have decided now is the time to dump dollars en masse.. and that has smashed crude oil and silver prices higher. Stocks have shrugged it off for now...
It appears the ammunition for another leg higher in bond yields and small cap stocks is running dry quickly. As BofAML notes, speculators added to Russell 2000 positions for the 5th of the 6 weeks, reducing small cap shorts to smallest in a year. Spec buying of crude continues unabated with the 4th week in a row lifts net long to highest since August. The bond complex is at extremes everywhere: large specs bought 2Y bonds for the 7th week in a row, lifting the 2Y bond net long to a 2-year high; but levered funds have never been more short the long-bond. Finally, VIX Spec shorts have soared to one-year highs. All-in-all positions are extreme to say the least.
- Nepal earthquake toll crosses 3700 (Reuters)
- Greeks Add Pressure on Tsipras to Compromise as Talks Resume (BBG)
- With No Deal on Greek Bailout Aid in Sight, Some in Europe Suggest ‘Plan B’ (WSJ)
- BOJ Shouldn’t Ease Further; Yen Fell Enough: Business Lobby Head (BBG)
- Clinton Foundation admits making mistakes on taxes (Reuters)
- Here’s the Old Nemesis Starting to Spook Bond Traders Again (BBG)
- Deutsche Bank to Trim Investment Banking (WSJ)
- China’s Stocks Rise to Seven-Year High on SOE Merger Speculation (BBG)