Italy Youth Unemployment Hits Record High 44.2%, Concerns Rising "Recession Exit May Be Unsustainable"Submitted by Tyler Durden on 07/31/2015 07:32 -0400
While the overall unemployment rate for the Eurozone also unchanged at 11.1%, it was renewed concern about what is going on in Italy, where unemployment rose from 12.5% to 12.7%, while Italy's youth unemployment rate, which surprisingly jumped by nearly 2% to 44.2%, a record level. As Bloomberg put it, "Italy’s jobless rate unexpectedly rose in June as businesses continue to dismiss workers amid concerns that the country’s exit from recession may not be sustainable."
In a repeat of Thursday's action, Chinese stocks which had opened about 1% lower, remained underwater for most of the session before attempting a feeble bounce which took the Shanghai Composite fractionally into the green, before the now traditional last hour action which this time failed to maintain the upward momentum and the last day of the month saw a surge in volume which dragged the market to its lows before closing roughly where it opened, -1.13% lower. This caps the worst month for Chinese stocks since since August 2009, as the government struggles to rekindle investor interest amid a $3.5 trillion rout, one which has sent the Shanghai market lower by 15% - the biggest loss among 93 global benchmark gauges tracked by Bloomberg.
Having exposed the reality that the world's capital markets are a manipulated shell game, Janus' Bill Gross has a message for the perpetual bulls in his latest letter to investors - "say a little prayer." Gross continues, "low interest rates are not the cure – they are part of the problem," warning that ZIRP has enabled, "a host of zombie and future zombie corporations now roam the real economy. Schumpeter’s 'creative destruction' – the supposed heart of capitalistic progress – has been neutered. The old remains in place, and new investment is stifled." As he previously warned, when the central bank manipulation is removed the likely trajectory of prices is downward...
- Second-quarter GDP seen rebounding on consumer spending, housing (Reuters)
- China Stocks Fall as Traders Puzzle Over Sudden Late-Day Swings (BBG)
- European 'alliance of national liberation fronts' emerges to avenge Greek defeat (Telegraph)
- Thomas Cook warns on earnings over Greece (MW)
- Largest Greek toy seller Jumbo warns of hit from capital controls (Kathimerini)
- Chevron and Exxon Get the Plaudits, but Some Smaller Drillers Faring Well (WSJ)
- Schäuble outlines plan to limit European Commission powers (FT)
- UBS Deal Shows Clinton’s Complicated Ties (WSJ)
Chinese Stocks Tumble In Close Of Trading "Causing Panic", US GDP To Be Revised Higher On Seasonal AdjustmentsSubmitted by Tyler Durden on 07/30/2015 06:54 -0400
We start off the overnight wrap up with the usual place, China, where in a mirror image of Wednesday's action, stocks once again started off uneventful, then gradually rose in the afternoon session and meandered near unchanged territory until the last half hour, when out of the blue they tumbled to close near the day's low, some 2.2% below yesterday's closing level. What caused it? One possible catalyst came from Reuters which reported that that Chinese banks were investigating their exposure to the stock market via wealth management products and loans backed by stock as collateral.
"The Federal Reserve on Wednesday kept interest rates near zero but cited progress in the U.S. job market, a sign it remains on course to raise interest rates in September or later this year. At the same time, however, it flagged a nagging concern about low inflation, which is creating caution among officials and could convince them to delay the day of the first increase."
With no press conference, expectations were muted going in (aside from the ubiquitous VIX-dip, equity market rip that happens at every FOMC meeting) but seemed to hint at delaying a September/December liftoff is on the cards - needing more job improvement...
- *FED SAYS LABOR MARKET CONTINUED TO IMPROVE, JOB GAINS `SOLID'
- *FED REPEATS RISKS TO ECONOMY, JOB OUTLOOKS `NEARLY BALANCED'
- *FED: RATE TO RISE AFTER `SOME FURTHER' JOB MARKET IMPROVEMENT
And so the confusion continues... the jobs market is telling the Fed one thing, while inflation (held down by a lackluster Chinese demand which has in turn exacerbated a global deflationary supply glut) is saying something different, and remember 25bps doesn't matter (just like subprime was "contained"). Full redline below.
Pre-Fed: S&P Futs 2096.00, 10Y 2.2880%, Gold $1095, EURUSD 1.1050, VIX 12.92
Here is the paradox as succinctly summarized by Deutsche Bank, which notes that the current -29% year-over-year drop in the CRB index implies YoY headline CPI inflation falling from 0.1% to -0.9% over the next couple of months, or just in time for the September or December FOMC meetings both proposed as the "lift off" date. This would be the largest year-over-year drop since September 2009 (-1.3%) and one of the lowest prints in modern history.
As Greece prepares to weather still more austerity in exchange for a third EU bailout program, the economy has fallen into a veritable tailspin, as retail sales collapse, doctors flee, and credit is nowhere to be found.
US Middle Class Stays Dead: Homeownership Drops To 48 Year Low; Median Asking Rent Soars To All Time HighSubmitted by Tyler Durden on 07/28/2015 11:17 -0400
Earlier today, the US Census released its latest homeownership data, which confirmed that for what is left of America's middle class, owning a home has become virtually impossible, with the homeownership rate plunging from the lowest level since 1986, or 63.7%, to just 63.4% the lowest reading since the first quarter of 1967. And the punchline, which should come as no surprise to anyone: with housing no longer affordable to most, the median monthly asking rent just rose to a record $803 across the US.
"Greece is playing it correctly. Agree to everything. Give Germany no excuse to do what they want. Get the money. This is why France, among others, want this all agreed as quickly as possible, because they know this deal is not how it will end, but an end that keeps the EUR together must be found. The Germans know it too. They also know that they have been had and it is their own fault."
The German Council of Economic Experts is out with a new report on euro area crisis management which backs state bankruptcies and euro exits for governments deemed "uncooperative." "A permanently uncooperative member state should not be able to threaten the existence of the euro. In view of this, the Council of Economic Experts recommends that the withdrawal of a member state from the currency union must be possible as an utterly last resort," the council says.
Just as Japan thought they could go back to pre-Plaza Accord growth rates by holding on to the old ways in the 1990s, the Chinese will expect the growth miracle to return in 2016 with the “right” policies. It will not. It is all a mirage though. Just as in Japan, the Chinese will not allow the market process to do its magic to get the economy back on a stable footing. Draconian measures to stop the recent stock market rout are a clear testimony of that. In other words, the Chinese economy will resemble that of Japan, and it will do so very soon, if it is not already there. China is heading straight into a zero growth environment, and will be mired there for years to come.
Last week was a complete dead zone for US macro, however with the peak of Q2 earnings season there was more than enough commotion for everyone. This week US macro starts to pick up again, with Durable Goods on Monday, followed by Case Shiller, Q2 GDP, the Chicago PMI, various consumer confidence indices, and of course, the July FOMC meeting on Wednesday.
It all started in China, where as we noted previously, the Shanghai Composite plunged by 8.5% in closing hour, suffering its biggest one day drop since February 2007 and the second biggest in history. The Hang Seng, while spared the worst of the drubbing, was also down 3.1%. There were numerous theories about the risk off catalyst, including fears the PPT was gradually being withdrawn, a decline in industrial profits, as well as an influx in IPOs which drained liquidity from the market. At the same time, Nikkei 225 (-0.95%) and ASX 200 (-0.16%) traded in negative territory underpinned by softness in commodity prices.