Market Conditions

FOMC Statement Key Take Aways: "Fed Leaves Door Open For June Rate Hike"

  1. The April 27 statement downgraded economic activity, said it "slowed", but labor market conditions "improved further" and inflation still expected to rise toward 2% over the medium term.
  2. Removed language that "global economic and financial developments continue to pose risks".
  3. Kansas City Fed's Esther George dissented in favor of a rate hike.

Fed Removes "Global Risk" Alert But Keeps Monitoring "Global Economic And Financial Developments" - Full Statement Redline

Since Yellow-Yellen's March dovefest, stocks have rallied, China has stabilized, and while economic data has been weak in general - jobs and inflation (which is what The Fed claims to care about) have been positive. So how does The Fed make June a live meeting, tilt hawkish, and still protect the narrative of recovery and the sanctity of their equity market (which is all that really matters)...

  • *FED REMOVES REFERENCE TO GLOBAL EVENTS POSING RISKS TO OUTLOOK
  • *FED SAYS LABOR MARKET IMPROVED EVEN AMID SIGNS OF SLOWER GROWTH
  • *FED REPEATS ECONOMIC SITUATION WARRANTS ONLY GRADUAL RATE HIKES

So "risks" are "balanced" and The Fed is "data depedent" again - rate-hikes are back on the table, however here is a key change: instead of monitoring "inflation developments" the Fed is now "monitoring inflation indicators and global economic and financial developments" which is effectively the same as the struck language on "global economic and financial developments."

No Energy Recovery In Sight: Freeport Fires 25% Of Its Oil And Gas Workers

FCX is taking immediate steps to reduce oil and gas costs further. In April 2016, FCX announced a new management structure and is instituting an approximate 25 percent oil and gas workforce reduction. The newly structured oil and gas management team is actively engaged in managing costs and developing plans to preserve and enhance asset values.

Is There A Problem With The BLS Employment Reports?

It is quite evident there is something amiss about the BLS’ employment reports. Is the disparity simply an anomaly in the seasonal adjustments caused by the depth of the financial crisis? Is there an exceptional and unaccounted for margin of error in the surveys? Or, is it something more intentional by government-related agencies to keep “confidence” elevated as Central Banks globally “paddle like crazy” to keep global economies afloat.

 

Fighting Recessions With Hot Air

Krugman is wrong. An economic boom, based on nothing but hot air (phony credit, with no real resources behind it), is fraudulent. It will never take us to real growth. Just the contrary. The best thing to do is to pop the bubble…and then pick up the pieces. Besides, it will pop whether we want it to or not. Heck, we believe in magic as much as the next guy. But the magic act is wearing a little thin. The smoke is dispersing. The rabbits have disappeared. All the glam and sparkle, the shock and awe, the claptrap and hokum they’re all giving way to economic reality. We are beginning to see more clearly: the Fed’s theory is nothing but hot air.

Crude Slides After Kuwait Strikes Ends; China Markets Tumble

The biggest catalyst for overnight markets, first reported on this site, was the announcement by Kuwait that its oil workers had ended their strike which disrupted oil production in the 4th largest OPEC producer for 3 days cutting it by as much as 1.7 mmb/d, and had served to offset the negative news from the Doha debacle. Kuwait Petroleum also added that it would boost output to 3m b/d within 3 days, which in turn has pressured the price of oil overnight, and the May WTI contract was back to just over $40 at last check, sliding 2%. Not helping things was a very dejected Venezuela oil minister Eulogio Del Pino who said at a conference in Moscow that he sees oil prices returning to lows in 3-4 weeks if oil producers can't make a deal. For now the algos - and central banks - disagree.

Morgan Stanley Profit Plunges By More Than 50% As Trading Revenue Tumbles 40%

Morgan Stanley's results were quite ugly: total revenue of $7.8 billion barely changed from the previous quarter, and was down 21% from Q1 2015, however due to the sharp drop in consensus estimates in recent months, revenues was a "beat" to the $7.76 billion expected. Earnings likewise were ugly, tumbling by 53% from $2.4 billion to $1.1 billion, or $0.55 per share. This too was a beat as a result of a sharp plunge in Q1 EPS expectations in recent months.

U.S. Futures Flat After Oil Erases Overnight Losses; Dollar In The Driver's Seat

In another quiet overnight session, the biggest - and unexpected - macro news was the surprise monetary easing by Singapore which as previously reported moved to a 2008 crisis policy response when it adopted a "zero currency appreciation" stance as a result of its trade-based economy grinding to a halt. As Richard Breslow accurately put it, "If you need yet another stark example of the fantasy storytelling we amuse ourselves with, juxtapose today’s Monetary Authority of Singapore policy statement with the storyline that the Asian stock market rally intensified on renewed optimism over the global economy. Singapore is a proxy for trade and economic growth ground to a halt last quarter." The Singapore announcement led to a sharp round of regional currency weakness just as the dollar appears to have bottomed and is rapidly rising.

The Great Glut: Why LNG Markets Might Not Balance Before 2025

The worldwide rush to build liquefaction capacity has the characteristics of speculative bubbles and gold rushes of past centuries. In the case of the developing LNG glut, the blame must probably be shared by overambitious promoters and prestigious but imprudent energy experts.

According To This Beige Book The Fed Should Be Hiking Rates Now

The summary: modest to moderate growth, increasing consumer spending, stronger labor market conditions, improving labor market conditions, and most importantly, rising wages almost across the board. And virtually no mention of "global" conditions (and certainly no mention of China). So what excuse will the Fed use not to hike in April again?

Former IMF Chief Economist Admits Japan's "Endgame" Scenario Is Now In Play

Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately be forced to inflate away its debt in a desperate end-game, one of the world’s most influential economists has warned.  "One day the BoJ may well get a call from the finance ministry saying please think about us – it is a life or death question - and keep rates at zero for a bit longer."