Despite dismal data (or the potential for great escape velocity is around the corner data), major event risks, and a Treasury market that just won't buy the dream of recovery that they are selling; the Fed stuck to its tapering guns... with a consensus $10bn taper...
- *FED TAPERS BOND BUYING TO $45 BLN MONTHLY PACE FROM $55 BLN
- *FED: ECONOMY PICKED UP, CONSUMER DEMAND RISING `MORE QUICKLY'
Shifting from "the economy slowed due to weather..." to "consumer spending is rising more quickly" the Fed is in full consensus "everything's gonna be alright " mode. This leaves the Fed buying $25bn a month of Treasuries and $20bn of MBS each month and facing the tough reality that their trillions did not generate enough momentum in the US economy to overcome some snow...
Pre-FOMC: S&P Futs 1874, 10Y 2.66%, EURUSD 1.3865, Gold $1295
Today's FOMC announcement may be one of the more anticlimatic (if long-winded) in a long time: consensus largely expects the taper to continue by another $10 billion, and the Fed will, erroneously, suggest that the economy is growing at a "modest" pace (if only one ignores such things as a complete collapse in US GDP growth due to harsh weather: who knew that all it takes to stop a $17 trillion juggernaut economy was cold winter weather), but it doesn't mean there can't be surprises. Courtesy of Bloomberg, here is a list of the key things to look for in today's statement.
As we showed in the map earlier, the spread of pro-Russian-held cities is rapid across eastern Ukraine and it seems things are reaching a very dangerous head very quickly. As RIA reports, the Central Election Commission of the "Donetsk People's Republic" has agreed to hold a referendum (covering 55 territorial election commissions, more than two thousand polling stations, and more than two million ballots) on May 11th. Citizens will answer one simple question, "Do you support the act of the proclamation of independence of the Donetsk State People's Republic?" As RIA adds, leadership have stated that region of Donetsk will not vote in the May 25 presidential election in Ukraine if the majority of residents support independence.
For today's Pop QEez: will the most recent FOMC statement due out in under two hours, be a new record of over 877 words, or will the Fed finally begin tapering, not only of its bond purchases, but of the confused message it is trying to send to HFT algos and whatever carbon-based traders are left?
Vladimir Putin 'confirmed' yesterday that there were no Russian forces 'boots on the ground' in Ukraine and so it seems the daily growing list of cities that are falling to pro-Russian separatist forces throughout Eastern Ukraine - as the following chart shows - suggests an ever more divided nation is verging on civil war, despite the best efforts of the West to sanction their way to a fix. As Turchinov warned this morning, there is "real danger of the Russian Federation beginning a land war against Ukraine... our armed forces are on full military readiness."
Deja Vu All Over Again: Fannie, Freddie Would Need Another $190 Billion Bailout When Things Go SouthSubmitted by Tyler Durden on 04/30/2014 11:43 -0400
While it will come as a surprise to exactly nobody, certainly nobody who understand that the US financial system is no better financial shape than just before the Lehman crash as nothing has been fixed and everything that is broken has been merely swept under the rug (for details see Paul Singer's explanation posted last night) of epic-er leverage, the news that when (not if) the US economy succumbs to a severe economic downturn Fannie and Freddie would require another taxpayer funded bailout, one of $190 billion or even more than the first $187.5 billion-funded nationalization of the GSEs, can only bring a smile to one's face.
ADP "beat" sent stocks and USD up, bonds and gold down. GDP "miss" sent stocks and USD down, bonds and gold up... and now the Fed's emergency meeting has sent all asset classes into a Tapering-the-taper frenzy as chaos hits markets sending stocks up to highs of day (less Taper), Bond yields to lows of day (low growth less taper), USD tumbling (less taper, moar QE vs ECB), and Gold jumping higher (less taper, more QE)... correlation is crumbling everywhere as the Fed's calming communications cause chaos...
Everyone knows that the FOMC announcement, due today at 2 pm, will be the culmination of an orderly, traditional 2-day meeting which started yesterday, April 29. What few know, however, is that in addition to the generic FOMC meeting which started yesterday at 10:30 am, at about the same time, the Fed also held an "expedited" emergency meeting between the four board governors Yellen, Tarullo, Stein, and Powell. So what was discussed? We won't know because the "meeting was closed to public observation by Order of the Board of Governors because the matters fall under exemption(s) 9(A)(i) of the Government in the Sunshine Act (5 U.S.C. Section 552b(c)), and it was determined that the public interest did not require opening the meeting."
Here is a shocker: for all the damnation Obamacare, which according to poll after poll is loathed by a majority of the US population, has gotten if it wasn't for the (government-mandated) spending surge resulting from Obamacare, which resulted in the biggest jump in Healthcare Services spending in the past quarter in history and added 1.1% to GDP, real Q1 GDP, which rose only $4.3 billion sequentially to $15,947 billion, would have been negative 1%.
Bomb Blast Rocks Train Station Hours After China's "Fists & Daggers... Strike-First" Warning To TerroristsSubmitted by Tyler Durden on 04/30/2014 10:01 -0400
Police are the "fists and daggers" in the fight against terrorism and will "strike first", China's President Xi Jinping said on a trip to the western Xinjiang region where authorities say members of a Muslim minority are waging a violent separatist campaign. As Reuters reports, this is the same region that sufferred the knife-wielding terrorist attack in the city of Kunming that killed 29 people and injured 140. However, his warning seems to have sparked further action - though not confirmed as a terrorist attack - as a blast occurred at a railway station in Urumqi, capital of northwest China’s Xinjiang region. Details about the blast and casualties are sketchy but local reports suggest up to 50 injured.
Following last month's biggest miss in a year, Chicago PMI resurged to its highest level (and biggest beat) since October 2013. Optimism is rife in the report as the rise in new orders and production is now instantly extrapolated into escape velocity growth (as opposed to catch-up demand). Prices Paid dropped... which is odd if there's so much awesome demand? Employment improved, but did not offset March's decline. Of course, the 5 standard deviation beat of expectations is now considered the new normal...
It was back on January 30 that the Goldman economist team made its first downward revision to what then was a 3.0% forecast to Q1 GDP. Exactly three months later we find that Goldman was off by only 97% when Q1 GDP printed at 0.1%. That's ok - they are economists, and thus are expected to be massively, epically wrong. So here is Goldman with its first "tracking forecast" for Q2 GDP. It is.... drumroll.... 3.0%. How long until this number too is lowered to 0.1% (to be sure, all that rain in New York City has to detract at least 1%-1.5% from Q2 GDP right?).
As the day of the IMF's release of funds to Ukraine draws near - solving all their problems with yet more debt, we are told to believe - Russia's Gazprom has gently reminded the Ukrainian government that it owes them... $3.49 billion! and its due the 7th day of May!
For all the talk that imminent, inevitable, "any second now" CapEx spending renaissance is getting, we can only assume we are looking at a wrong chart of the change in quarterly fixed income spending that plugs straight into the US GDP calculation. There is no other possible explanation.
Stocks jerked higher on the ADP beat and dumped on the GDP miss to end approximately unchanged from pre-data levels but bonds and bullion are well bid (for now) ahead of the FOMC.