• 09/21/2014 - 14:52
    Dear Janet; If I may be so forward, as a concerned citizen of the Constitutional Republic of the United States, it is with great consternation that I feel compelled to write you this distressing...

Output Gap

Tyler Durden's picture

Citi Explains Why FX Moved So Much More Than Other Markets After FOMC





The Fed came across as somewhat hawkish relative to expectations, according to Citi's Stephen Englander, but FX made an outsized move against high-beta G10 and EM relative to equities buying and moderate money market moves... here's why...

 
Tyler Durden's picture

Key Events In The Coming Week: iPhone 6 Release And Other Less Relevant Happenings





One of the more amusing comments overnight came from Bank of America, which now predicts that China's export growth will be boosted by iPhone 6 by 1% per month through year-end. Whether or not this is accurate is irrelevant, but we are happy that unlike before, BofA has finally figured out that iPhone sales are positive for Chinese GDP, not US, which was the case with the release of the iPhone 4 and 5, when clueless strategists all came out boosting their US (!) GDP forecasts on the iPhone release. We note this because the long-awaited release of Apple's new iPhone will certainly grab some attention tomorrow. According to a BofA poll last week and of the 124 respondents surveyed, 66% of those have noted that they are going to buy the new iPhone and of those planning to buy 75% of those will be replacing their iPhone 5/5s.

 
Tyler Durden's picture

Dour Comments By China's Leading Supply Chain Manager Reinforce Citi's View For €1 Trillion ECB QE





Li & Fung’s latest results yesterday offered some interesting anecdotes. The company’s performance for the first 6 months was hampered by ongoing macroeconomic weakness, geopolitical and weather events in its key destination markets (US and Europe). Price discounting remains a theme in US retail even beyond the end of June. The company also noted a reduction of foreign tourist flow by Russian tourists into Europe which is affecting retail markets there. This fits consistently well with some of the ECB’s geopolitical concerns outlined at its previous policy meeting.

 
Tyler Durden's picture

Goldman Post-Mortem: Minutes Have More Hawkish Tone





The July FOMC minutes generally had a slightly hawkish tone, warns Goldman's Jan Hatzius, emphasizing that labor market slack had improved faster than expected and that the labor market was now closer to what might be considered normal in the longer run. Overall, these remarks suggest that the change in the labor market language found in the July FOMC statement - shifting focus to broader labor market indicators rather than the unemployment rate specifically - was not intended to be a dovish change, as some commentators thought at the time. Finally, some participants noted some evidence of stretched valuations in specific markets.

 
Tyler Durden's picture

NIRP DERP: A Chart Of What Europe Economy Really Looks Like





Curious what Europe's true economic state is? The chart below, showing Europe's annual inflation or lack thereof, and which just dropped from 0.5% to 0.4%, missing estimates of an unchanged print despite the ECB's ongoing and losing war with disinflation, and soon deflation, shows all you need to know.

 
Tyler Durden's picture

Goldman Warns, Congress Is Preparing To Tame The Fed





Having already warned that looming political uncertainty is not at all priced-in to US equities, Goldman's Alec Phillips points out that legislation was introduced earlier this week (July 7) in the US House that would attempt to revamp the FOMC's monetary policy process. The bill would require the FOMC to justify to Congress each policy decision relative to a Taylor rule specified in the legislation. While Goldman, do not expect the bill to get very far, but the issue does appear to be a growing focus for some lawmakers and we expect further action on it in the near term.

 
Tyler Durden's picture

Key Events In The Coming Week





This week brings PMIs (US and Euro area ‘flash’) and inflation (US PCE, CPI in Germany, Spain, and Japan). Among other releases, next week in DMs includes [on Monday] PMIs in US (June P), Euro Area Composite (expect 52.8, a touch below previous) and Japan; [on Tuesday] US home prices (FHFA and S&P/Case Shiller) and Consumer Confidence (expect 83.5, same as consensus), Germany IFO; [on Wednesday] US Durable Goods Orders (expect -0.50%, at touch below consensus) and real GDP 1Q anniversary. 3rd (expect -2.0%) and Personal Consumption 1Q (expect 2.0%), and confidence indicators in Germany, France and Italy; [on Thursday] US PCE price index (expect 0.20%), Personal Income and Spending, and GS Analyst Index; and [on Friday] Reuters/U. Michigan Confidence (expect slight improvement to 82, same as consensus), GDP 1Q in France and UK (expect 0.8% and 0.9% yoy, respectively), and CPI in Germany, Italy, Spain and Japan.

 
Tyler Durden's picture

Here Are The Funniest Quotes From BofA As It Throws In The Towel On Its "Above-Consensus" GDP Forecast





It is hard not to gloat when reading the latest embarrassing mea culpa from Bank of America's Ethan Harris, who incidentally came out with an "above consensus" forecast late last year, and has been crushed month after month as the hard data has lobbed off percentage from his irrationally exuberant growth forecast for every quarter, and now, the year. As a result, BofA has finally thrown in the towel, and tongue in cheekly admits it was wrong, as follows: "our tracking model now suggests growth of -1.9% in 1Q and 4.0% in 2Q for a first half average of just 1.0%.... Momentum is weak, but fundamentals are strong. We have lowered second half growth to 3.0% from 3.4%."

 
Tyler Durden's picture

Even The Fed Admits The "Natural" Rate Of Interest Is Lower Than Markets Are Pricing





One of the most important, but difficult to measure, concepts in macroeconomics is the natural or equilibrium real interest rate. This is the rate of interest consistent with full employment and stable inflation. The last few weeks have seen bond yields tumble and a rising cacophony of market participants questioning both the Fed's central tendency of terminal or natural rates (around 4%) and the market's perception of how fast we get there. SF Fed Williams models see a 1.8% natural rate, BofA also believes it is between 1.5 and 2%; and now Citi admits, "fair value of long-term rates may be lower than we and other market participants judged them to be."

 
Tyler Durden's picture

Why Is Goldman Hoping The "Winter" Ends Before July





"by July we expect the US economy to be in full recovery from the weather- and inventory-induced slowdown in Q1, and this should push US rates higher and boost the Dollar, including against the Yen." - Goldman Sachs

 
Tyler Durden's picture

Futures Ignore Ukraine Re-Escalation, Hope For Positive Surprise From Draghi





Despite Mario Draghi and Janet Yellen's (repeat) attempt to steal the show today, the first when the ECB reports its monetary decision (with zero real chance of announcing any change in policy considering all the furious, and failed, attempts to jawbone the Euro lower) as it faces the dilemma of deflationary pressure, record low bond yields and interest rates at record lows coupled with an export crushing Euro just shy of 1.40, and a practical impossibility to conduct QE even as the hawks jawbone a "potential" European QE to death, while Janet Yellen conducts the second part of the congressional testimony this time before the Senate Budget Committee where she will again, say nothing at all, it appears the world will be focused on Russia once again after the latest 24 hour "de-escalation" gambit is now once again dead and buried and on top of it is Putin waving a "come launch a nuclear attack at me, bro" flag.

 
Marc To Market's picture

The Week Ahead





Prak central bank balance sheets are still ahead.  Interest rate increases are still several quarters out.  Austerity has peaked.  The output gap has peaked.    What does this mean in the week ahead ?  

 
Tyler Durden's picture

Barclays Asks Is It Finally Time To Short Japanese Bonds?





For a decade or two, it's been dubbed the widowmaker (though truth be told, the losses are more bleed than massive capital loss like those holding US growth stocks currently), but as Barclays notes the Japanese bond market 'conundrum' (that nothing like a recovery is priced into the JGB curve, which is failing to price even a partial, eventual success of the Abe government's reflationary agenda) may finally be ready to be played..."We are always on the lookout for asset prices that seem inconsistent with the more plausible economic and financial scenarios. Sometimes these discrepancies point toward necessary alterations of our fundamental world view. In other cases, they point toward investment opportunity. At the moment, one of the most glaring discrepancies between macro and markets is the long end of the Japanese curve."

 
Tyler Durden's picture

Futures Fail To Levitate Green Despite Atrocious Chinese And Japanese Econ Data





The main overnight event, which we commented on previously, was China's trade data which was a disaster. March numbers turned out to be well below market consensus with exports falling 6.6% YoY (vs +4.8% expected) and imports falling 11.3% YoY (vs +3.9% expected). The underperformance of imports caused the trade balance to spike to $7.7bn (vs -$23bn in Feb). Pricing on the Greek 5-year syndicated bond is due later today, with the final size of the bond boosted to EUR 3bln from EUR 2.5bln as order books exceed EUR 20bln (equating to a rough bid/cover ratio of over 6) as the final yield is set at 4.75% (well below the 5.3% finance ministry target and well above our "the world is a bunch of idiots managing other people's money" 3% target). Ireland sold EUR 1bln in 10y bonds, marking the third successful return to the bond market since the bailout. Also of note, this morning saw the release of lower than expected French CPI data, underpinning fears of potential deflation in the Eurozone.

 
Tyler Durden's picture

Post-Payrolls Euphoria Shifts To Modest Hangover





After Friday's surge fest on weaker than expected news - perhaps expecting a tapering of the taper despite everyone screaming from the rooftops the Fed will never adjust monetary policy based on snowfall levels - overnight the carry trade drifted lower and pulled the correlated US equity markets down with it. Why? Who knows - after Friday's choreographed performance it is once again clear there is no connection between newsflow, fundamentals and what various algos decide to do.  So (lack of) reasons aside, following a mainly positive close in Asia which was simply catching up to the US exuberance from Friday, European equities have followed suit and traded higher from the get-go with the consumer goods sector leading the way after being boosted by Nestle and L'Oreal shares who were seen higher after reports that Nestle is looking at ways to reduce its USD 30bln stake in L'Oreal. The tech sector is also seeing outperformance following reports that Nokia and HTC have signed a patent and technology pact; all patent litigation between companies is dismissed. Elsewhere, the utilities sector is being put under pressure after reports that UK Energy Secretary Ed Davey urged industry watchdog Ofgem to examine the profits being made by  the big six energy companies through supplying gas, saying that Centrica's British Gas arm is too profitable.

 
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