Sentiment in general remains poor and all the focus is on gold's weakness in dollar terms, despite gold's strong gains in euro terms in 2014 and so far in 2015. Poor sentiment is of course bullish from a contrarian perspective and suggests all the froth has been washed out of the gold market.
After crashing from November to January (oh that's just weather), the Philly Fed factory index has failed to do anything but limp higher in the last 3 months. Printing at 7.5 in April (slightly better than the expected 6.0, Philly Fed continues to hover around 1 year lows. The post-weather rebound is entirely missing as New Orders plunged to 2 year lows (though employment surged) with more firms reporting price decreases than reporting price increases.
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.
We often hear various Fed officials described as hawks or doves but Janet Yellen’s Fed brings to mind another avian metaphor. They are afraid to raise rates for fear that doing so would upset the asset market inflation process and derail what is left of their theory. In her press conference last week Yellen said that stock market valuations were on the high side of historical norms, an appellation that only works if one includes the stock bubble of the late 90s. It seems that she and the other members of the FOMC have decided that another epic stock market bubble is better than admitting they were wrong. This FOMC doesn’t have any hawks or doves, only chickens.
With markets pricing in nothing but a "permanent plateau of margins," it appears the Philly Fed is about to ruin that meme too... Thanks to the collapse of the Prices Received (and Prices Paid) indices, margins are now implicitly the lowest since Lehman. The last 2 times "margins" were this low, the US entered recession.
Philly Fed hasn't missed for 4 months in a row since Feb 2012. Printing at 5 (against expectations of 7) the March Philly Fed data is the weakest since Feb 2014. Under the covers it was even uglier... Employees, Average Workweek, New Orders, Prices Received, and Shipments all plunged. Great news for the stock market bulls... yet another dismally bad data item to keep The Fed from hiking.
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.
With Philly Fed's 10th president, Charles Plosser retiring effective March 1, 2015, algos were wondering if he would be replaced with another former Goldman partner, or if his seat would be filled with yet another academic. The answer, as the Pgilly Fed reported moments ago, is the latter. Meet the new president of the Philly Fed: Patrick T. Harker, 56, currently president of the University of Delaware, former dean of the Wharton School at UPenn, and a member of the Philadelphia Fed's board of directors. His career academic background: Harker has a Ph.D. in civil and urban engineering, a master's degree in economics, and an M.S.E. and B.S.E. in civil engineering from the University of Pennsylvania. Wait, so no econ PhD? There may be some hope yet...
After spending the past year deteriorating with each passing month, as global acceleration dipped decidedly in the negative camp, the only thing that kept the Goldman Global Leading Indicator "swirlogram" somewhat buoyant was that "Growth" measured in absolute terms had remained slightly positive. Not any more: according to Goldman's latest global economic read, the world is now officially in contraction, following a sharp plunge in both acceleration and growth in February.
Following January's crash in Philly Fed from 21-year highs to 12-month lows, expectations among the Keynesian-gazers was for a mean-reverting bounce... it didn't. Falling for the 3rd month in a row, Philly Fed printed a worse-than-expected 5.2 (against 8.43 exp), its lowest in a year. New Orders tumbled to its lowest in a year but most critically, "hope" - the six-month forward outlook index - tumbled from 50.9 to 29.7 - the biggest MoM drop since lehman.
After yesterday's FOMC Minutes, despite a huge dovish reversal by the Fed - one which increasingly puts its "credibility" and reputation at risk - stocks were unable to close green, or even above 2100, for one simple reason: uncertainty with the fate of Greece. Overnight there has not been much more clarity, when as previously reported Greece submitted a 6 month extension request to its master loan agreement but not to its bailout extension, a nuance lost in the annals of diplomacy. But is this the much-awaited Greek capitulation? Or will the Eurogroup reject this too? The answer may be available in a few hours after an emergency Eurogroup meeting due later today. However, as usual stocks are ready to "price in" yet another Greek conflict resolution, and after futures were lower by 7 points overnight, were up 4 points at last check: a rebound which will not correct if the latest Greek "compromise" fails to deliver.
With the biggest miss since August 2011, The Philly Fed Factory Index crashed from 21 year highs in November to the lowest since Feb 2014. The headline 6.3 print, missing expectations of 18.7, follows last month's drop for the biggest 2-month drop since Lehman. Under the surface things are even worse with the employment sub-index plunging to its worsdt since June 2013 and the outlook for CapEx slashed in half from 24.8 to 13.2. But but but fundamentals...
Market Wrap: "It's Turmoil" - Overnight Gains Wiped Out, Futures Trade Below 2000 On SNB "Shock And Awe"Submitted by Tyler Durden on 01/15/2015 07:56 -0400
To paraphrase a trader who walked into the biggest FX clusterfuck in years, "it's total, unprecedented market turmoil." So while the world gets a grip on what today's historic move by the SNB means, which judging by the record 13% collapse in the Swiss Stock Market shows clearly that the SNB market put is dead and the SNB may be the first central-banking hedge fund which just folded (we can't wait to see what the SNB P&L losses on its EURCHF holdings will be), here is what has happened so far for anyone unlucky enough to be walking into the carnage some 2 hours late.