For those who thought that the world's biggest company losing over $40 billion in market cap in an instant on disappointing Apple earnings, would have been sufficient to put a dent in US equity futures, we have some disappointing news: with just over 7 hours until the FOMC reveals its April statement, futures are practically unchanged, even though the Nasdaq appears set for an early bruising in the aftermath of what is becoming a disturbing quarter for tech companies. Instead of tech leading, however, the upside has once again come from the energy complex where moments ago WTI rose above $45 a barrel for the first time since November after yesterday's unexpected 1.07 million barrel API inventory drawdown.
Following the weakness in Philly and Dallas Fed regional - fading off Feb/Mar dead cat bounces - Richmond Fed's epic 9-standard-deviation biggest spike ever to 7 year highs in March appears to have been a one of as it fell back from 22 (3rd highest ever) to 14 (still above expectations) - the biggest drop since August. Of course how one can take this seriously is anyone's guess as shipments , new orders, wages, and workweek all crashed from March's embarrassing spike as did inventory levels for finished and raw materials (not good for Q2 GDP). Worse still outlook for six months ahead saw wages, workweek and new orders collapse further.
With the Fed decision just one day away, followed the very next day by the increasingly more irrational BOJ, stocks had no desire to make significant moves and overnight's boring session was the result, as European stocks and U.S. index futures rose modestly but mostly hugged the flatline while Asian declined 0.2% for a third day as raw-material shares declined and Tokyo equities slumped before central bank meetings in the U.S. and Japan this week. China’s stocks rose the most in almost two weeks, up 0.6% but failed to rise above 3000 on the Shanghai Composite, in thin trading.
The April FOMC gathering headlines a crowded economic events calendar this week. The post-meeting statement, released Wednesday afternoon, should continue to strike a cautious tone. There will be no press conference and updated economic and financial forecasts will not be released. Few expect the FOMC to add the “balance of risks” sentence back into its communiqué at this point. Doing so would be quite bearish for risk assets as it would definitely open the door for a June rate hike.
With oil losing some of its euphoric oomph overnight, following the API report of a surge in US oil inventories, and a subsequent report that Iran's oil minister would skip the Doha OPEC meeting altogether, the global stock rally needed another catalyst to maintain the levitation. It got that courtesy of the return of USDJPY levitation, which has pushed the pair back above 109, the highest in over a week, as well as a boost in sentiment from the previously reported Chinese trade data where exports rose the most in over a year, however much of the bounce was due to a favorable base effect from last year's decline. Additionally, as RBC reported, the 116.5% y/y increase in China’s reported March imports from HK likely reflects the growing trend of "over-invoicing", which is merely another form of capital outflow.
While the market is still enjoying the post-NFP weekly data lull, economic data starts to pick up again in the coming days, alongside the start of the reporting season. Below are this week's key events.
Key economic releases for the coming week include the ISM non-manufacturing report on Wednesday. There are several scheduled speeches from Fed officials this week. Fed Chair Yellen will take part in a discussion with former Fed Chairs on Thursday.
It is always hard to buck the crowd, to be a bear when the market is up this much, this fast. Stocks are rallying and being underweight gets harder to maintain every day. The bulls are out there yapping about how this was just another correction, another dip to buy and that we better get back in, yada, yada, yada. What makes being bearish so hard is the noise of the perpetually bullish street, the lure of easy money in a market you know is overvalued but keeps going higher. Like JM Keynes "I change my mind when the facts change." Despite the rally, the facts – at least for now – still favor the bears.
This morning's Brussels suicide attacks have led to risk-off sentiment across European asset classes, with Bunds higher and equities firmly in the red, although if the Paris terrorist attacks of November are any indication, today's tragic events may be just the catalyst the S&P500 needs to surge back to all time highs. FX markets have also been dominated by events in Brussels, with USD and JPY strengthening, while EUR and GBP softening throughout the European morning.
After a quiet start to the week, data flow picks up into the Easter weekend.
At the same time as the PBOC was cautioning about the dangers of excess debt (just as it injected a record amount of loans into the financial system), China's central bank warned about dangers from a stock market bubble, and perhaps just to assure the bubble gets even bigger, at the same time China eased on margin debt limits, in the process sending Chinese stocks soaring higher by 2.2%, and pushing the Shanghai Composite over 3000 for the first time in months as China now appears set to attempt another housing bubble "soft landing" while at the same time restarting its housing bubble.
"Federal Reserve officials reduced estimates of how much they expect to raise short-term interest rates in 2016 and beyond, nodding to lingering risks to the economic outlook posed by soft global economic growth and financial-market volatility."
When nearly half Americans view the Government as an "immediate threat" what are the odds they'll be honest during employment surveys?
In recent weeks Chinese stocks remained relatively resilient, levitating quietly day after day. That all changed overnight when the Shanghai Composite plunged by 6.4% with the drop accelerating into the close. This was the biggest drop in over a month and was big enough to almost wipe out the entire 10% rebound from the January lows in one session.