One day after the biggest jump in stocks in two months on what has still been an undetermined catalyst, overnight global equities did a U-turn with European stocks falling toward a one-month low and U.S. stock index futures declining, as crude oil dropped toward $44 a barrel. A driver the move lower was a sharp reversal in the USDJPY which dropped 100 pips from yesterday's highs which took places just as Goldman predicted the USDJPY has finally bottomed, facilitated by a weaker dollar (also following a Goldman report yesterday forecasting the USD was about to surge).
While wholesale sales rose modestly MoM, the continued stagnation in wholesale inventories (lowest since 2010) bodes poorly for Q2 GDP. At 1.36x, the wholesale inventories-to-sales remains near record highs, but Automotive inventories to sales soared to cycle highs at 1.83x (as Auto sales dropped 0.7% MoM but inventories rose 1.0% MoM).
In what has been an approximate repeat of the Monday overnight session, global stocks and US futures rose around the world as oil prices climbed toward $44 a barrel, with risk-sentiment pushed higher by another plunge in the Yen which has now soared 300 pips since the Friday post-payroll kneejerk reaction, and was trading above 109.20 this morning. At the same time base metals regained some of Monday’s steep losses following Chinese CPI data that came in line while PPI declined for 50 consecutive months however showed a modest rebound from the prior month on the back of China's recent, and now burst, speculative commodity bubble.
In the traditional post payrolls data lull, we’re kicking off what’s set to be a much quieter week for data this week with nothing of note due to be released in the US on Monday, however the week picks up with notable economic dataon NFIB small business cofidence, Import prices, PPI and culminates with Friday's retail sales report, UMichigan sentiment and business inventories.
The economy’s capital structure remains imbalanced as a result of the enormous amount of monetary pumping since 2008 (total TMS-2 growth since then: approx. 128%). There is a limit to this though, even if it cannot be quantified. What can be stated though is that the greater the boom, the greater the eventual bust usually is. There are now more and more indications that a decisive inflection point may be quite near.
Ever since the beginning of 2016 and especially in the last few weeks, while Hugh Hendry has been chugging horse doses of blue pills, Joe LaVorgna has finally discovered the red pill, and perhaps because he has been focusing a little to much on the performance of the stock price of his employer, or for whatever other reason, gradually Wall Street's biggest bull has mutated into its most outspoken bear.
it has been a rather quiet session, which saw Japan modestly lower dragged again by a lower USDJPY which hit fresh 17 month lows around 170.6 before staging another modest rebound and halting a six-day run of gains; China bounced after a slightly disappointing CPI print gave hope there is more space for the PBOC to ease; European equities rose, led by Italian banks which surged ahead of a meeting to discuss the rescue of various insolvent Italian banks, while mining stocks jumped buoyed by rising metal prices with signs of a pick-up in Chinese industrial demand.
There was one thing keeping US GDP growing in recent months: rising inventory. Well, no more. Moments ago the Dept of Commerce reported the latest inventory data and following major historical revisions, not only was last month's inventory print slashes from 0.3% to -0.2%, but the February Inventory number was a dramatic -0.5% drop, far below the -0.2% expected.
In the final day of the week, it has again been a story of currencies and commodities setting stock prices, however instead of yesterday's Yen surge which slammed the USDJPY as low as 107.67 and led to a global tumble in equities, and crude slide, today has been a mirror imoage after a modest FX short squeeze, which sent the Yen pair as high as 109.1, before easing back to the 108.80 range. This, coupled with a 3.5% bounce in WTI, which is back up to $38.54 and up 4.9% on the week as speculation has returned that Russia and OPEC members can reach a production freeze deal on April 17, led to a global stock rebound which will see the S&P open back in the green for 2016.
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.
Given the extraordinary jumps in several regional Fed surveys, hope was rife that US Manufacturing PMI's flash print would jump... it didn't. Hovering near multi-year lows at 51.4, PMI missed expectations of 51.9 by the most since Aug 2013. With record highs in wholesale inventories, Markit claims that "pre-production inventories decline at the steepest pace in over 2 years." The blame for this plunge: dollar strength, weak global demand, and Trump.
Global stocks and U.S. equity futures are fractionally higher (unchanged really) this morning (despite China's historic NPL debt-for-equity proposal) as traders await the main event of the day: the ECB's 1:45pm CET announcement, more importantly what Mario Draghi will announce during the 2:30pm CET press conference, and most importantly, whether he will disappoint as he did in December or finally unleash the bazooka that the market has been desperately demanding.
With China's Plunge Protection Team having intervened and set a positive spin on another poor session, traders put declines in Asia behind them as European markets rose along with U.S. index futures and commodities. European shares advanced for the first time in three days on speculation the region’s central bank will ramp up monetary stimulus on Thursday. A gauge of raw materials rebounded from its biggest selloff in a month, buoyed by gains in oil and copper. Furthermore, the previously noted selloff in Japanese government bonds - one which triggered circuit breakers and which some speculated may have been precipitated by the BOJ itself - dragged Treasuries and German bunds lower, gold fell a second day and the euro dropped versus most of its major peers.
In the aftermath of last week's disappointing G-20 Shanghai summit, there was much riding on this weekend's start of the China's People's Congress, and specifically what if any stimulus announcement Beijing will make; sadly for stimulus addicts China mostly disappointed and after the unimaginative scope of growth proposals, it is hardly surprising that European stocks and US equity futures have taken a leg lower.