"Better Than Expected" European Data Sends Implied Dow Jones Open To All Time High

Tyler Durden's picture

If Friday and yesterday it was Europe's reporting of ugly and below expectation economic data that pushed US stock futures ultimately higher, today it will be Europe's modest economic data beats that will send futures, where else, higher, and result in the Dow Jones breaking its nominal all time highs at the open or shortly thereafter. Following the Chinese economic update in its State of the Union address, which as we reported earlier, saw China set more moderate growth targets for itself resulting in the SHCOMP nearly wiping out Monday's losses, it was Europe's turn to shine which it did following the report of various Service PMI, which unlike last week's horrible manufacturing PMI data, were better than expected with the natural exception of Spain which printed at 44.7, well below the January 47.0, the first drop since September driven by the sharpest job losses since March of 2009, and Italy which dropped from 43.9 to 43.6, same as expected. The core countries' Services PMI beat: France coming at 43.7, on expectation of an unchanged print from last month's 42.7, and Germany printing at 54.7 vs also an expectation of an unchanged 54.1.

The blended Eurozone Services PMI therefore printed at a combined 47.9,
up from the previous print 47.3, which was expected to not change in
February, sending the EURUSD briefly to its overnight highs.

The UK Services PMI was also an upside surprise, coming at 51.8 on expectations of drop from 51.5 to 51.0, and offsetting some of the recently horrible economic data out of the UK. More good news came when the January retail sales data was reported, which printed at 1.2% on expectations of a 0.3% rise from a -0.8% drop.

Not very surprisingly, however, it was not the EURUSD which benefited the most from this data, which has lost nearly 50 pips from its overnight highs following the better economic news, but the various equity futures which have one centrally-planned goal: to take out all time DJIA highs or else, and unless something changes in the next three hours, precisely this will happen.

Quick recap of European markets currently:


  • Spanish 10Y yield down 3bps to 5.07%
  • Italian 10Y yield down 11bps to 4.77%
  • U.K. 10Y yield up 5bps to 1.95%
  • German 10Y yield up 3bps to 1.44%
  • Bund future down 0.21% to 145.2
  • BTP future up 0.67% to 109.22
  • Euro +0.04% to $1.3032
  • Dollar Index down 0.08% to 82.13
  • Sterling spot up 0.28% to $1.5158
  • 1Y euro cross currency basis swap up 2bps to -22bps
  • Stoxx 600 up 1.2% to 292.36

SocGen summarizes the important data for macro traders, such as central bankers:

Core markets pretty much took the turbulence in Asia in their stride yesterday and in truth there is no reason why legislation in China to cool the property market should have severe knock-on effects on the attitude of Western markets vis-a-vis risk. If the law helps to bring back and establish longer-term stability in hot Chinese real estate, then this should minimise the sudden flight to quality. Having said that, the decline in the services ISM suggests a cooling in the pace of activity since the leadership transition coincided with a burst in confidence last November. Although it does not explain the 5.2% correction in commodity price indices like the CRBY, it does help to justify it. The decline has been Fed and USD led and until yesterday showed no immediate sign of abating. This has dragged AUD/USD to eight-month lows, and even the RBA's decision not to cut the cash rate overnight may not guarantee that fresh lows could be plumbed in the days and weeks to come. It boils down to the quality of incoming US macro data and rate spreads. On the same topic, how Italy and BTP yields and hence spreads over Bunds are keeping euro markets in their tight grip is evident from correlations between various securities and the 2y or 10y BTP yields/ EUR/USD and 10y EU swaps currently stands at -0.90. The interesting part is that the correlation with equities, ie the Stoxx 600 index, has totally broken down. Running at -0.8 a week prior to election day, it has collapsed from -0.6 on the 26 February to -0.04 yesterday. In other words, equities are making their moves independently of what's happening in Italy.

DB's Jim Reid completes the overnight recap:

Markets seem to be at different temperatures at the moment depending on where you place the thermometer around the world. Italy is in danger of being stuck in an arctic winter with the FTSEMIB down another 0.85% yesterday and now 13% below its recent peak. At the other end of the spectrum, summer is being experienced in the US market. The S&P 500 closed up +0.46% last night and is now only 3% off its all time peak (The Dow is within 37 points). Elsewhere there's a hint of autumn in the air in China following Monday's 3.65% declines on headlines about property tightening measures. Indeed just to highlight the magnitude of the decline yesterday, the Shanghai Composite Property index finished the day around 9.2% lower which is the worst single day performance since June 2008. Finally one would have to say that Japanese markets are resembling spring with the Nikkei 40% now above its 2012 lows.

Looking at yesterday’s price action in more detail, equity markets in Europe and the US once again opened weaker before spending the rest of the session making up lost ground. Monday’s sell-off in Chinese equities probably explained the early weakness – and from there the S&P 500 managed to rally +0.86% from the lows. Data and newsflow was on the thin side and S&P 500 volumes were the lowest in three weeks. Interestingly, Apple suffered another fall with the stock down 2.42% yesterday to hit a 52-week low. The share price is now about 40% below the peak in September last year. In stark contrast to Apple, Google hit an all-time high yesterday, with the FT saying that it perhaps reflects a shift in perception of the two tech companies’ respective prospects in the smartphone market.

Returning to China, there were more Chinese headlines overnight as the nation’s top leaders meet at the annual National People’s Congress although most of the news has been a reiteration of previous themes. Premier Wen’s final work report showed that China has kept its 2013 GDP growth target unchanged at 7.5%. Inflation is targeted at 3.5% for this year. For the record, DB's Jun Ma is looking for GDP and inflation of 8.2% and 3% respectively for 2013. Wen also said that the country will strengthen the management of local government debt. The ministry of finance said that China’s 2013 budget deficit is planned at about 2% of GDP and will feature a 10.7% spending increase in the military’s budget. In terms of property controls, the vice-minister of Housing and Urban-Rural Development commented that the government will release more detail on new property curbs within a week. Data wise, the HSBC Chinese Services PMI has come in at 52.1 versus 54.0 previously. Nevertheless, major bourses in Asia are trading firmer overnight led by the Nikkei (+0.3%) and Hang Seng (+0.1%).

The former has been helped by comments from deputy BoJ governor candidate Iwata who said at a confirmation hearing in Japanese parliament that the BoJ has a responsibility to quickly achieve a 2% inflation target and should buy longer term government bonds. Elsewhere the Aussie dollar is 0.5% higher against the USD following the RBA’s decision to leave the cash rate unchanged.

In the world of fixed income, Fed Vice-chair Janet Yellen yesterday said that the Fed should continue on with its $85bn/month bond purchases and whilst recognising that some risks need monitoring over time she doesn’t see any that would cause her to advocate a curtailment of the purchase program at this stage. 10yr UST yields rose 3bps higher to close at 1.87% yesterday. Yellen’s comments provided little support to commodities however with gold down 3.1% and Brent (-0.28%) down for its fifth consecutive day to $110/bbl yesterday.

On that note, the FT had an interesting story noting that China has overtaken the US as the world’s largest net importer of oil. According to provisional numbers from the EIA, US net oil imports dropped to 5.98m bbls a day in December (lowest since February 1992) while China’s net imports rose to 6.12m bbls a day according to Chinese customs.

In terms of the latest in Italian politics, Beppe Grillo’s Five Star Movement may consider staging a confidence-vote walk-out to allow a political group to form a government according to two unidentified senators cited by Bloomberg. A Senate walk-out would lower the threshold for achieving a majority, making it easier to secure enough backing for a new government. It would also allow Five Star to let a government form while sparing its senators from a "Yes" vote in a confidence ballot.

On a separate but related topic, it was also interesting to hear comments from the EU’s Ollie Rehn that poor economic growth in Europe may “justify in a certain number of cases reviewing deadlines for the correction of excessive deficits”. Angela Merkel chimed in yesterday adding that with all the consolidation in budgets, we “don’t quite have the answers for where the growth should come from” (Bloomberg).

Turning to the day ahead, EU finance ministers meet today and we have the latest round of services PMIs in Europe. Across the Atlantic, the services ISM and IBD/TIPP economic optimism index are the major data releases of note. All these are perhaps the warm up acts to Draghi's post ECB press event on Thursday and Payrolls on Friday.

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stocktivity's picture

The CNBC idiots will have the pom poms out and be giddy all day....It's all Bullshit!

razorthin's picture

Don't worry.  Remember what happened shortly after they first broke out the Dow 14K hats?  That was nothing.

GetZeeGold's picture



Dow Jones....an oasis in a cesspool of crap.

new game's picture

lemmings to the sea of liquidity.

sheep to the cliff

whats in your "broker" account?

paper gains > spend fucker spend!

Navymugsy's picture

I remember the "NASDAQ 5000" party with Neil and Maria on CNBC. That didn't end well did it?

Sudden Debt's picture

you can't believe how many morons believe all the shit they say...

every wednesday, when it's salesmeeting, it's like a dozen parots repeating the words from boobtv...

I think there should be a constant disclosure at the bottom of the screen saying:


TBT or not TBT's picture

We don't know whether they're sluts or saints, we can only see the boobs. The sluttiness is in the eye of the CNBC beholder.

SheepDog-One's picture

Never pay any attention to all the 'bad news', there will be some 'good news' by tomorrow to erase it all!

VonManstein's picture

Inflation is coming. USH3 looks like shit and has done for weeks even though those dogmatists do not see. And hate the ES so much will never accept it.

Gold and Silver are ever so slightly starting to respond to bonds the way they should, and I see this as a very slow realisation within the market of inflation.

in the next few weeks/months we will see blow off tops in ES USD and USH3 the POSITIVE correlation between them will continue on the downside, volatile of course.

Shorting this market only provides short covering ammo for the stop runs. Retards do not seem to understand this.

Its best just to look for assets that have been getting whacked and look for inverse correlations, and play the coming ES USD USH3 weakness that way


fonzannoon's picture

Metals will be knocked down by the open. Today is all about celebrating the new records. We probably blast through them and just keep rocketing. They may even get the dow to 15k today just beause....

VonManstein's picture

I dont think they will but it doesnt matter if they are. Things have been pushed to the limit. Its endgame territory now...

USD up SPX up doesnt seem to raise eyebrows around here.. everyone just like to bitch about EURJPY USDJPY EURUSD pushing up stocks but the fact is both SPX and USD are up since 2010 and i say this is the final pump of worthless assets before they are dumped for real stuff.

My Silver Cycle says we have the lows or are within 3% and a weekly close above 29.333 would be big

Gold new ATH in 2months per decade long Log Chart.

GEc1 is worth looking at as volume is coming back to that this month. I would suggest its portend a final blow off in USH3

fonzannoon's picture

I admire your persistence. But why would they dump themselves? Why end the cocaine and hooker parties? Let's be honest this market has gone up and stayed up longer than anyone around here ever imagined. What is to say that they don't just keep a nice 10% gain per year from here until I am too old or broke to give a shit? They got us this far. I know people think Ben has to stop printing or unwind this at some point but he will just keep pointing to the dollar relative to other currencies and say "what's the problem?"

VonManstein's picture

He won’t stop printing. He will likely print more. it doesn’t matter.. he is powerless now. QE~ is an admission of failure and thats why USH3 moving down.. What the hell can he really do now to jam rates lower? Nothing.  Print another 85 on top? Wont work.

More likely they will blow the stock market just to get an attempt at the "risk off" mantra benefiiting USH3 but that will be short lived.

Gold Silver are going to blow higher very soon. Strange volume and price action is increasing. This is a global pump and dump an not all assets are being pumped. China no pump. Russia no pump. Metals no pump. Oil not pumped really. Coomods in general are "underperforming"

This is all a trade

The assets being pumped are USH3 USD SPX all of it.. (Europe too) and those being dumped (underperforming) will very soon see a huge price increase as this greatest trade is pulled off.

mayhem_korner's picture

Gold Silver are going to blow higher very soon.


Not sure what "very soon" is...I am more in the camp of "inevitably."  But, moreover, the rise in gold and silver prices is going to be much more obscured by the price of paper gold and paper silver.  One of the reactions of the awakened will be to dump into GLD and SLV as their way of feeling like they've jumped to safety.  All that does is dilute and mask the real price of real (physical) gold and silver.  Decoupling will be almost unseen except to those holding the physical.  The Chinese and every other CB positioning for the demise of the dollar know this.

VonManstein's picture

they will let the paper market run higher. they dont want to destroy the paper maket of they can never dream of controlling prices.

Paper Gold and silver going higher also

mayhem_korner's picture

Let's be honest this market has gone up and stayed up longer than anyone around here ever imagined.


Disagree.  The markets are propped up pretty well along the lines of where many opinions have suggested - at or even above the pre-crash highs.  No huge surprise to me - they could inflate the Dow to 16K before the Jenga tower tumbles.  But where it settles is far more relevant than where it peaks. 

The more interesting thing to me is the narrative around it - the unabated urging of "retail" to jump back in, the manufactured "rise" in housing prices (driven by the banks' withholding of shadow foreclosure inventory AND laundered speculation in key Case-Shiller markets), the blatant hammering down of PMs and petroleum (there's a memo out there somewhere that says 'buy only equities, NO oil and NO gold'), the insistence that inflation is "under control" (notice Ben went there last week even though it's not been the topic du jour), the pre-positioned blame of "the sequester" as an impetus for the coming recession, etc., etc. 

The narrative to me is the most desperate it's been since the Inception-speed train wreck started. 

Mr. Hudson's picture

We have a couple years before total collapse.

Popo's picture

It will only be a "collapse" for one segment of society.   All the moronic 401k'ers and stock-holders will be patting themselves on the back for investing wisely.   The rest of America will be piss broke.   At the end of the day the moral of the story will be, "See? You shoulda bought stocks."    Never mind that buying stocks was a patently insane move for anyone with a clue.   The dumb money will feel "right".   And the .01% will be even more generationally wealthy.   The "smart" people will be bitching and angry... and they'll be marginalized as being whiners.   America: Ain't it fucking great?   Buy buy buy.  Consume consume consume.   All other activities will be punished.


fonzannoon's picture

Sounds about right. Cash is trash. Schiff said it best.


Maybe everyone expected the market to crash but that just is not the way it's going to go.

mayhem_korner's picture



You're describing the present situation, not the one that will prevail.

falak pema's picture

people lived very well during the feudal ages; inside their castles! Not outside.

TBT or not TBT's picture

Minstrels and wenches and those giant turkey legs. I'm there.

francis_sawyer's picture

How come 'better than expected' reports are never blamed on the weather?

goldenbuddha454's picture

Same reason colder than expected winters are blamed on global warming, its all in the writer's agenda.

francis_sawyer's picture

Let's put all the weather temperature recording devices on black asphalt parking lots, create a paper market for carbon credits, tell everybody to paint their roofs white, & buy CALLS on Sherman Williams...



Sudden Debt's picture

define better than expected....



Pipo the clown is driving his Beemer on a forest road at 180 miles a hour....

Pipo the clown crashes into a tree with his Beemer at 180 miles a hour...

Pipo the clown is death because if flew through the window head first against that tree, the car is in flames BUT!!! HIS IPHONE WAS ALSO CATAPULED OUTSIDE HIS CAR IN A SOFT PATCH OF GRASS!!!




mayhem_korner's picture



What inspirational concoction are you drinking this fine hour, SD?

Sudden Debt's picture

Well, as it's the first day that we're having this great weather, I went for a couple of drinks on a terrace in the sun.

But I did eat also, some cheese, some salami which could have been horse, dog, rat or maybe even with some pieces of cow!

And as it's not allowed to take a nap at work... bastards....

I'll just doze behind my computer all day writing poetry :)


fuu's picture

"But I did eat also, some cheese, some salami which could have been horse, dog, rat or maybe even with some pieces of cow!"

Better than expected too.

Grand Supercycle's picture

DXY daily chart retracement & DOW [bullish] daily megaphone wedge confirmed thus more equity upside expected while DXY retraces from current overextended level.

Bullish warning for DXY monthly long term chart continues and this will not change.


Orly's picture

What is a "bullish warning," anyway?


disabledvet's picture

"new record while CRB gets crushed." this is a bull market. I'll leave it to the historians to figure out how the end game was avoided. The President has an A Team in for new Agency heads. "the only one's that are a problem are the Republicans." no news there. Definitely bullshish as these folks are HIGHLY aggressive unlike the last batch which had "passive/aggressive issues." apparently the President isn't bluffing when it comes to "bombing Iran before he visits Israel." We know what that money wants but what does that money buy...what does that money buy...

HD's picture

Was there ever any doubt?

On a side note - I mentioned yesterday CNBC seems to have removed the comments section from their website (maybe it's my web settings) - which had turned quite negative in the past few months. If this is the case it only goes to show they have lost control of the narrative altogether.


Orly's picture

I noticed that, too.

I used to love to read the comments because they went directly against whatever the author was trying to pump and you could almost see them fuming.  Plus, they had a lot of Gucci watches and work-from-home ads appear there.


fonzannoon's picture

:( that was the only place I shopped for gucci watches.

Orly's picture

Interesting movement in the overnight, fonz.

Looks like USDJPY and EURUSD are de-coupling as risk currency pairs.  Euro may be ready to roll over, leaving the yen pairs free to move about the cabin (higher...).

After the rah-rah buttons have been pushed, watch for a very stealthy Euro slide below 1.30, and beyond.


VonManstein's picture

EURUSD and much of the FX spectrum is fractal of 2010. EUR currently in December 2010. i say it goes to 1.40 after its plumbed the lows

AUD  NZD also doing same thing.

I also think this will occur in a equity negative environment or ES will only follow for half the rally then it will top and decline with USD

.. lets face it, who expects EURUSD to gain while ES falls? Who iis positioned for this? No one.

thats why it will happen just like 2007

HD's picture

"I used to love to read the comments because they went directly against whatever the author was trying to pump and you could almost see them fuming."

It was the only reason I visited their site - I stopped watching CNBC in November, so now I'm CNBC free. I need a new propaganda dealer.


razorthin's picture

They blocked my account in 2010.  They couldn't handle my vitriol.

francis_sawyer's picture

don't tell me you caved and made the mistake of bringing the evil episcopalians into the mix...

Hulk's picture

Its the shakers that are evil Francis. All that body movement gotta be a sin...

TBT or not TBT's picture

Those thick cabinet doors too....

Orly's picture

Oh, haven't you heard of MarketWatch?  You have to read between the lines but they give off "signals" all day long.  Once you learn to decode what they're not saying, you get an insight into what is really happening.



mayhem_korner's picture



Someone recently took a major shot at Diana Olick (CNBC's real estate "madame", whose articles can't get past the first sentence without the phrase "the housing recovery").  The commenter exposed all of the fallacy of her "reporting" and told her to find a real job before her journalistic integrity was no more.  Was by far the highlight of the page. 

But hey, don't get too worked up about it...it's just censorship.

JackT's picture

Today is the perfect day. Everything is fine in China and this March snowstorm is the perfect cover to the mid-end Q1

mayhem_korner's picture



More sheep being lured into the pre-slaughter pens (the equity markets).  That's all that will come of the new "highs". 

It's the best opportunity in several years to pull what you (still) have out of equities and convert to PMs or Swiss Francs. 

Orly's picture

USD not CHF.  Trust me.


DblAjent's picture

I can't decide if they are, in fact, just luring more sheeps to slaughter, or if they intend to perpetuate this market with artificial props and manipulation?? I've been parked on the sidelines since mid-Dec (except for physical PMs which I lost in a rare avalanch accident) and I missed this move to the upside. I see no reason for the market to be where it is but, if they are feeding it, should we not be at the table as well?