As market participants slowly make their way back to trading desks around the post-Easter world, and especially the US where a truncated session on Friday morning ended in tears for anyone hoping for a 2015 US recovery following an abysmal March nonfarm payrolls print, they find that unlike on previous occasions, the equity futures liftathon is nowhere to be found this morning, with the S&P set to resume trading in the red for 2015. Away from Greece, whose future remains in limbo, the biggest development over the holiday weekend was a Goldman note in which the central-bank friendly firm said that "the right policy would be to put hikes on hold for now."
After a few days of dollar weakness due to concerns that the Fed's rate hike intentions have been derailed following some undisputedly ugly economic data (perhaps the Fed should just make it clear there will never be rate hikes during the winter ever again) the USD has resumed its rise, and as a result risk assets, after surging early in the overnight session driven by the Nikkei225 and the Emini, the "strong dollar is bad for risk" trade has re-emerged, with the Nikkei dropping almost 500 points off its intraday highs, with US equity futures poised to open lower once more, sliding nearly 20 points in the overnight session, and surprising the BTFDers who have not seen five consecutive days of "risk-off" in a long time.
After three days of unexpected market weakness without an apparent cause, especially since after 7 years of conditioning, the algos have been habituated to buy on both good and bad news, overnight futures are getting weary, and futures are barely up, at least before this morning's transitory FX-driven stop hunt higher. Whether this is due to the previously noted "blackout period" for stock buybacks which started a few days ago and continues until the first week of May is unclear, but should the recent "dramatic" stock weakness persist, expect Bullard to once again flip flop and suggesting it is clearly time to hike rates, as long as the S&P does not drop more than 5%. In that case, QE4 is clearly warranted.
It is a centrally-planned "market" and everyone is merely a bystander. Last night, following a dramatic China PMI miss, which as previously reported tumbled to the worst print since early 2014 and is flashing a "hard-landing" warning, the Shanghai Composite first dipped then spiked because all a "hard-landing" means is even more liquidity by the PBOC (which as we suggested a month ago will be the last entrant into the QE party before everyone falls apart). Then, this morning, a surprise beat by the German (and Eurozone) PMI was likewise interpreted by the algos as a catalyst to buy, and at this moment both European stock and US equity futures are their session highs. So, to summarize, for anyone confused: both good and bad data is a green light to buy stocks. In fact, all one needs is a flashing red headline to launch the momentum igniting algos into a buying spasm.
As previously observed (skeptically), a main reason for the surge in the DAX, and thus the S&P, on Friday was premature hope that the Greek talks earlier were a long-overdue precursor to a Greek resolution, and as we further noted yesterday, subsequent bickering and lack of any clarity as we go into today's critical "final ultimatum" meeting between Merkel and Tsipras, is also why the Dax was lower by 1.1% at last check, even if the EURUSD continues to trade like an illiquid, B-grade currency pair whose only HFT purpose is to slam all stops within 100 pips of whatever the current price may be.