- Dot Com part deux: Investors are showing increasing hunger for initial public offerings of unprofitable technology companies (WSJ)
- Poll Finds GOP Blamed More for Shutdown (WSJ)
- House, Senate Republicans Offer Competing Plans on Debt-Limit, Government Shutdown (WAPO)
- Obama, Republicans aim to end crisis after meeting, hurdles remain (Reuters)
- US Rethinks How to Release Sensitive Economic Data (WSJ)
- Chinese East Oil Fuels Fresh China-US Tensions (WSJ)
- ECB Agrees on Swap Line With PBOC as Trade Increases (BBG)
- China September Auto Sales Surge 21% on Japanese Rebound (BBG)
- JPMorgan Taps Taxpayer-Backed Banks for Basel Rules (BBG)
Despite stock (not bond) euphoria yesterday that a DC debt ceiling deal was sealed leading to the second largest risk ramp of 2013, last night was spent diffusing the excitement as one after another politician talked back the success of a "non-deal" that Obama rejected, at least according to the NYT. As a result, with both retail sales data and the PPI not being released (and the only data of note the always leaked UMichigan consumer confidence) markets will again be at the behest of developments on Capitol Hill, with some talk from Republicans suggesting a deal as early as today could be possible in an effort to reopen government on Monday. It is entirely possible that talks could continue over the weekend though, which would ensure a gappy open to Asian markets on Monday.
While the ongoing government shutdown, now in its second week, means even more macro data will be retained by the random number generators, central banks are up and running. This means that in the upcoming week the key event will be the release of the FOMC minutes from the last meeting at which the Fed surprised almost the entire market by not tapering asset purchases as effectively pre-announced. There are MPC meetings in the UK, Brazil, South Korea and Indonesia. The main focus, however, will be on the US political situation still. Data that will most likely be delayed this week includes the US Trade balance, JOLTs, Wholesale and Business inventories, Retail sales, PPI, Import Prices, and the Monthly Federal budget.
- U.S. Government Shut Down With No Quick Resolution Seen (BBG)
- 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
- Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
- Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
- Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
- Foreign Firms Tap U.S. Gas Bonanza (WSJ)
- Behind Standoff, a Broken Process in Need of a Broker (WSJ)
- Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
- Microsoft investors push for chairman Gates to step down (Reuters)
Following yesterday's modest bounce in equities punctuated by the traditional last minute spike, sentiment has reverted lower once again, driven by the uncertainty surrounding debt ceiling talks in the US, where lawmakers have until next Tuesday to agree to a spending bill, or much of the government will shut down. The Senate will vote on a spending bill later today, which will then be sent back to the House putting republicans in a quandary (Politico explains the complications surrounding the GOP's "Plan C"). It was reported that US House leaders are considering postponing action on a bill to extend the US government's borrowing power, with the leadership discussing a change of strategy to complete action on the stopgap spending bill before debating the debt-limit debate. In FX, GBP strengthened across the board this morning after BoE’s Carney said he does not see a case for more quantitative easing.
Following the FOMC surprise, no less than twelve Fed speeches will provide some "clarifications" on where the Fed now stands. It is very likely that this subject will continue to dominate the discussions of market participants. At the same time, US data will get scrutinized after the recent weakening and to see how warranted the Fed's concerns were. Two US consumer sentiment surveys, durable goods orders, and the third reading of Q2 GDP are important. In addition, monthly consumption and income data for August provide more information on the third quarter and of course there will be interest in the latest weekly claims numbers after some distortions in recent readings.
A few days ago, when we reported that the largest federation of unions, the AFL-CIO, had figured out that Obamacare was not all it was craked up to be and demanded changes be implemented to appease their constituency as pertains to multi-employer group health plans, many wondered if the administration would not simply cave and pass an exemption giving unions a sidedeal at the expense of all other participants. Last night that option was taken off the table when the Obama administration appeared to rule out giving unions a special deal to offer their workers extra ObamaCare subsidies. As AP reports, "on Friday night, the White House said the Treasury Department had issued a letter making clear that it does not see a legal way for individuals in multi-employer group health plans to receive individual market tax credits as well as the favorable tax treatment associated with employer-provided health insurance at the same time."
Not just “softness in the female business”
Overnight asset classes got a jolt following a report by Nikkei that Obama was moving toward naming Summers the next Fed chairman, citing “several close US sources,” pushing stocks modestly lower in Europe, with bond yields higher. According to the report, Obama is to name Summers as next Fed chairman as early as late next week, after the Federal Open Market Committee meeting. Otherwise, risk is still digesting the news of the confidential Twitter IPO, as it is becoming quite clear that some of the largest names (Hilton also announced yesterday) are seeking to cash out in the public markets. Is this the top?
As opposed to the "pixie dust tout of fairy tales forever" that is trotted out by the herd every day, the fllowing brief look at Taper realities, 'manufactured' numbers unreality, systemic Muni bonds concerns, and of course, political risk provide color for what was described this morning on CNBC as a market bereft of 'bear market theses. As Tartakower once wrote, "The winner of the game is the player who makes the next-to-last mistake;" until then ts all foreplay.
- Obama Holds Fire on Syria, Waits on Russia Plan (WSJ)
- China Shadow Banking Returns as Growth Rebound Adds Risk (Reuters)
- Not one but two: Greece May Need Two More Aid Packages Says ECB’s Coene (WSJ)
- BoJ insider warns of need for wage rises (FT) ... as we have been warning since November, and as has not been happening
- California city backs plan to seize negative equity mortgages (Reuters)
- Home Depot Is Accused of Shaking Down Suspected Shoplifters (BBG)
- Most-Connected Man at Deutsche Bank Favors Lightest Touch (BBG)
- Norway Pledges to Limit Oil Spending (BBG)
- China Shadow Banking Returns as Growth Rebound Adds Risk (BBG)
- Gundlach Says Fed Is Mistaken in How It's Ending Easing (BBG)
All the latest updates and developments in the lethal Syrian foreplay farce.
Overnight, the market continued to digest news out of the UK that the formerly solid pro-war alliance has splintered following a historic vote by the House of Commons, leaving Obama to "go it alone." The result was a rather sizable slamdown in both crude and gold, accelerating as Europe opened for trading, and pushing gold back under $1400. This happened even as data out of Europe showed that European unemployment remained at a record high 12.1%, while inflation missed expectations and printed at 1.3%, or below 2% for the seventh month. Earlier in the session, headline data out of Japan showed that inflation had risen at the fastest pace since 2008. However, before the deflation monster is proclaimed dead, the core-core figure (excluding foods and energy) of the Tokyo CPI was down 0.4% yoy, unchanged since June for three months, suggesting that prices are still largely driven by energy-related costs. In other words cost-push inflation is rampant, which is the worst possible scenario and means the BOJ's QE is going to all the wrong place.
A quiet week to send off August ahead of a deluge of key data next week and as the fateful Septembr 18 FOMC announcement approaches. Still, quite a few macro events to keep track of.
A government that is operating under the credo "by the corporation for the corporation", rather than "by the people for the people."