Straightforward dispassionate overview of the investment climate
Yesterday, the IMF and World Bank issued warnings about rising interest rates, housing crashes and the global economy. The World Bank’s chief economist is inadvertantly offering important advice to investors and savers when he said that "now is the time to prepare for the next crisis ..."
Eurozone recessions, unemployment fiascos, toppling banks, crashing auto sales... didn’t exist, sez the Stoxx 600. But then an ugly thing happened.
- At least 74 dead in crashes similar to those GM linked to faulty switches (Reuters)
- Obama Calls for $1 Billion Europe Security Fund; Will Increase U.S. Military Presence in Eastern Europe (WSJ)
- Euro Inflation Slowing More Than Forecast Pressures ECB (BBG)
- China accelerates as euro zone stumbles (Reuters)
- Russia says Ukraine situation worsening, submits U.N. resolution (Reuters)
- Secondary Sales Squeeze Investors (WSJ)
- Barclays Said to Start Cutting Jobs in Investment Banking Unit (Bloomberg)
- Backlash Grows on Release of Sgt. Bowe Bergdahl in Taliban Prisoner Swap (WSJ)
- For fallen soldiers' families, Bergdahl release stirs resentment (Reuters)
- PIMCO's Gross stares at record outflow (Reuters)
White House Purchases Google Key Words to Slam Putin
While we await today's US Manufacturing ISM number (expected to rise from 54.9 to 55.5), here is how some 23 of the world's most important countries fared in May in their manufacturing data. In brief: as the below table shows, out of the 23 countries that have reported so far, 8 reported improvements in their manufacturing sectors in May, while 15, or two-thirds, recorded a weakening in mfg data from April. That's the bad news, and an indication that the latest upswing in the global manufacturing economy may be ending. The good news: despite the modest decline, there were only 7 countries "contracting" or in negative territory (below 50) and 16 in positive. In particular, France, Korea, and Norway moved from expansion to contraction.
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.
- Unstoppable $100 Trillion Bond Market Renders Models Useless (BBG)
- Afghan president fumes at prisoner deal made behind his back (Reuters)
- Spain to Unveil $8.6 Billion Stimulus Package (AP)
- How fracking helps America beat German industry (Reuters)
- Obama to Urge European Allies to Stay Tough on Russia (WSJ)
- Frenchman 'admits' Brussels shooting in video (AFP)
- Heloc Payment Jump to Take Bite Out of Consumer Spending (WSJ)
- Obama Said to Propose Deep Cuts to Power-Plant Emissions (BBG)
- Lehman Lesson Lost as Bank Lobby Gains Clout (BBG)
- WSJ reports that WSJ reporting on Icahn insider trading probe may have killed it (WSJ)
- KKR liquidates former Goldman Sachs traders-run hedge fund (Reuters)
How do you get rid of hundreds of tons of highly radioactive water? You dump it into the Pacific Ocean of course! In Japan, the Tokyo Electric Power Co. has made the “painful decision” to begin purposely dumping massive amounts of radioactive water currently being stored at the destroyed Fukushima nuclear facility directly into the Pacific. This is being done even though water radiation levels near Fukushima spiked to a brand new all-time record high just a few days ago.
While we are no experts in either geography (did Iran and Kazakhstan just get a lot closer?) or inter-continental ballistic missile identification (was anyone else test-firing nuclear missiles last night), the skies over Iran were glowing last night with what the news agency astrological experts said was "according to previous experiences, guessed to be the final stages of a long-range ballistic missile launcher." This is good news, for Iran, but, according to the Russian Navy blog, they are preparing for another ICBM test-firing next week... so Norway might want to be on the look-out.
- Qatar Bank: Deutsche Bank to raise $11 bln with help from Qatar (Reuters)
- AstraZeneca rejects Pfizer's take-it-or-leave-it offer (Reuters)
- China Home-Price Growth Slowdown Spreads as Sellers Discount (BBG)
- The new face of NSA: Mike Rogers (Reuters)
- Putin orders troops near Ukraine to return home (AP)
- Wall of Worry Rebuilt as Nasdaq Rout Sends Cash to High (Nasdaq)
- Bank of England's Mark Carney highlights housing market's risk to UK economy (Guardian)
- Greek Selloff Shows Rush for Exit Recalling Crisis (BBG)
- Anti-austerity Greek radicals ahead in Athens local election (AFP)
- 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)
With Western nations heavily indebted, including the hugely indebted U.S., Russia looks like the only realistic source of such funds. Geopolitical risk remains very much underestimated and there remains the risk of financial, economic and currency wars where the Kremlin uses gold as a geopolitical weapon to undermine the dollar.
This week markets are likely to focus on a few important data prints in DMs, including Philly Fed in the US (expect solid expansionary territory) and 1Q GDP releases in the Euro area (with upside risks). In DMs, the highlights of the week include [on Monday] Japan’s trade balance data and Australia business conditions; [on Tuesday] US retail sales, CPI in Italy and Sweden; [on Wednesday] US PPI, Euro area IP, CPI in France, Germany and Spain; [on Thursday] US Philly Fed, CPI, capacity utilization, Euro area and Japan GDP; and [on Friday] US Univ. of Michigan Confidence. In the US, we expect Philly Fed to print in solidly expansionary territory (at 14, similar to consensus) and to inaugurate what we call the active data period of the month. We also expect CPI inflation to print at 0.3% mom (similar to consensus), and core CPI inflation at 0.18% mom (slightly above consensus).