Less than a week ago, fresh from the aftermath of the recent dramatic six-sigma move in German Bunds, one of Europe's largest banks openly lamented that so far the ECB's QE had done absolutely nothing: "two months of QE for nothing." And lo and behold, as if on demand, overnight the ECB confirmed it had heard SocGen's lament when just before the European market open, ECB executive board member Benoit Coeure delivered a speech at the Brevan Howard Centre for Financial Analysis (appropriately named after a hedge fund) at Imperial College Business School (not to be confused with the July 26, 2012 Mario Draghi "whatever it takes" speech which also took place in London) in which he said that the ECB intends to "frontload" i.e., increase, its purchases of euro-area assets in May and June ahead of an expected low-liquidity period in the summer.
Since November, HAHB homebuilder sentiment has only beaten expectations once. May printed 54 (notably short of the 57 expectation). Despite all the previous hope for future sales, buyer traffic has fallen as The Midwest saw the biggest drop in sentiment (what about the post-weather bounce?) and The West rising modestly. The story was well-known: pessimism now offset by optimism later: present single family sales falls to 59 vs 61 last month, while future single family sales rise to 64 vs 63 last month, even as prospective buyers traffic falls to 39 vs 40 last month.
As the economic calendar slowly picks up following the NFP lull, we are looking at a busy week both globally and in the US, where an army of Fed speakers culminates with a Yellen speech on Friday at 1pm in Rhode Island.
With equities having long ago stopped reflecting fundamentals, and certainly the Eurozone's ever more dire newsflow where any day could be Greece's last in the doomed monetary union, it was up to gold to reflect that headlines out of Athens are going from bad to worse, with Bloomberg reporting that not only are Greek banks running low on collateral, both for ELA and any other purposes, that Greece would have no choice but to leave the Euro upon a default and that, as reported previously, Greece would not have made its May 12 payment had it not been for using the IMF's own reserves as a source of funding and that the IMF now sees June 5 as Greece's ever more fluid D-day. As a result gold jumped above $1230 overnight, a level last seen in February even as the Dollar index was higher by 0.5% at last check thanks to a drop in the EUR and the JPY.
With lumber prices plunging to fresh 3 year lows, the divergence between homebuilders and the most economically-sensitive commodity is starting to suggest a rather scary case of deja vu all over again.
Just as the S&P appeared set to blast off to a forward GAAP PE > 21.0x, here comes Greece and drags it back down to a far more somber 20.0x. The catalyst this time is an FT article according to which officials of now openly insolvent Greece have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, but were told that no rescheduling was possible. The result if a drop in not only US equity futures which are down 8 points at last check, but also yields across the board with the German 10Y Bund now just single basis points above 0.00% (the German 9Y is now < 0), on its way to -0.20% at which point it will lead to a very awkward "crossing the streams" moment for the ECB.
It appears the homebuilders have got over the weather issues as NAHB optimism surged to 56 - beating expectations of 55. However this surge merely brings NAHB confidence back to its average stagnant levels of the last 2 years. Only Midswest saw confidence drop as homebuilders hope soared with future buyers at the highest since Dec 2014. Let's just hope sales follow through or the weather excuse is going to get old...
If yesterday stocks surged on the worst 4-month stretch of missing retail sales since Lehman, one which BofA with all seriousness spun by saying "it seems not unreasonable to suspect that the March 2015 reading on retail sales gets revised up next month", then the reason why futures are now solidly in the green across the board even as German Bunds have just 14 bps to go until they hit negative yields and before the ECB is fresh out of luck on future debt monetization, is that overnight China reported its worst GDP since 2009 together with economic data misses across the board confirming China's economy continues its hard landing approach despite a stock market that has doubled in the past year.
While today's macro calendar is empty with no central bank speakers or economic news (just the monthly budget (deficit) statement this afternoon), it’s a fairly busy calendar for us to look forward to this week as earnings season kicks up a gear in the US as mentioned while Greece headlines and the G20 finance ministers meeting on Thursday mark the non-data related highlights.
China Stocks Soar To 7 Year High After Collapse In Exports; US Futures Slip On Continuing Dollar SurgeSubmitted by Tyler Durden on 04/13/2015 06:55 -0400
If there was any doubt that global trade is stalling, it was promptly wiped out following the latest abysmal Chinese trade data which saw exports tumble by 15% - the most in over a year - on expectations of a 8% rebound, with the trade surplus coming in at CNY18.2 billion, far below the lowest estimate. While unnecessary, with the Chinese GDP growth rate this Wednesday already expect to print at a record low, this was further evidence of weak demand both at home and abroad. Weakness was seen in most key markets, and the strength of China's currency was partly to blame, which again brings up China's CNY devaluation and ultimately QE, which as we wrote some time ago, is the ultimate endgame in the global reflation trade which, at least for now until the CBs begin active money paradropping to everyone not just the 0.01%, is only leading to inflation in stocks and deflation in everything else.v
Following yesterday's inexplicable ramp in stocks, which perhaps was driven by the collapse in oil (which sent energy companies higher because a 30x energy forward PE is cheap), and by the latest battery of disappointing economic data which made it less likely the Fed will proceed with a tightening move, overnight futures have given up a portion of the gains, and were trading down 0.3% at last check. And yet, if yesterday's weakness was driven by USD weakness, today's jump in the EURUSD above 1.06 (on absolutely disastrous German ZEW investor index print) is now somehow responsible for risk offness? And, adding confusion to insult, the 10 Y is down to 2.05% and in danger of re-entering a 1% handle. Sadly, nothing makes sense any more and today's conclave of central planners in the Marriner Eccles building ahead of tomorrow's 2pm FOMC "impatient" announcement isn't going to make it any better.
This week's main event will be the FOMC announcement on Wednesday at 2:00 pm and the subsequent press conference, the conclusion of the March 2-day Fed meeting, in which it is widely expected that Yellen will announce the end of the Fed's "Patience" with an economy in which resurgent waiters and bartenders continue to skew the job market even if it means consistently declining wages for 80% of the US labor force. Here is a summary of what else to expect this week.
- Germans Tired of Greek Demands Want Country to Exit Euro (BBG)
- Weak euro powers European stocks to new highs (Reuters)
- Siemens Cheers Euro Slump as Emerson Eases Dollar’s Sting (BBG)
- A Police Gadget Tracks Phones? Shhh! It’s Secret (NYT)
- If Economists Were Right, You Would Have a Raise by Now (BBG)
- iWatch: who’s going to pay $17K for a device that will be obsolete in two years? (Barrons)
- Ferguson Suspect Said to Claim He Wasn’t Firing at Police (BBG)
- Why Bankers Are Leaving Finance for No-Salary Tech Jobs (BBG)
It started off as the perfect storm for futures: after Sunday night's latest plunge in WTI, which saw it drop to the lowest price since Lehman, the double whammy that has now forced Deutsche Bank to become the first major institution to forecast no growth for S&P500 EPS in 2015, namely the strong dollar, reared its ugly head and the EURUSD seemed dangerouly close to breaching the all important 1.04-1.05 support level we first noted last week. However, overnight parties tasked with preserving "financial stability" appear to have once again stepped in, and not only has the EURUSD rebounded off 1.05, but crude is now just barely down from the Friday close as all firepower is put to the same use, that sent the Shanghai Composite soaring by 2.3% overnight, and which sent the Dax over 12,000 for the first time ever.
There was much confusion yesterday when algos went into a buying frenzy on news that Greece would submit a request for a 6 month loan extension, believing this means Greece has caved and will agree to a bailout programme extension as well. Nothing could have been further from the truth as we explained first moments after the headline struck, and also as Reuters validated moments ago when it said that "Greece will submit a request to the euro zone on Wednesday to extend a "loan agreement" for up to six months but EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout." But since the political nuances of diplomacy are lost on the math Ph.Ds who program the market-moving algos, the S&P did manage to roar above 2100 on what was another headfake and then forgot to sell off on the reality.