As market participants slowly make their way back to trading desks around the post-Easter world, and especially the US where a truncated session on Friday morning ended in tears for anyone hoping for a 2015 US recovery following an abysmal March nonfarm payrolls print, they find that unlike on previous occasions, the equity futures liftathon is nowhere to be found this morning, with the S&P set to resume trading in the red for 2015.
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That, however, should hardly come as a surprise with Q1 earnings season about to start, a season which is expected to post a decline in non-GAAP EPS terms, with Q2 and Q3 set to follow, all of this coming after a quarter which as we showed yesterday [24], tumbled over 17% (!) Y/Y in GAAP EPS terms.
Newsflow has been slow this weekend, with no material developments on the Greek front where Greece overnight agreed to repay its debt to the International Monetary Fund by April 9, IMF chief Christine Lagarde said after a meeting with Greek Finance Minister Yanis Varoufakis. There was speculation ahead of the visit that Athens might fail to meet the 460-million-euro ($501-million) IMF installment if forced to choose between the IMF and paying government workers. As AFP reported [25], Lagarde said repaying the IMF debt was in the country's best interest. "Continuing uncertainty is not in Greece's interest and I welcomed confirmation by the minister that payment owing to the Fund would be forthcoming on April 9th," Lagarde said in a statement.
In other words, Greece has "agreed" not to default. Still, many wonder if this is just another ploy to buy time (after all Greece is merely borrowing money from the Troika to repay the Troika with nothing sticking in the local economy, a recipe for a prompt government overhaul), while the Tsipras government pivots East, something we first suggested three months ago. As the Telegraph suggests this morning [26], "Greece's bail-out drama is threatening to take a geostrategic turn to the east. A mere three weeks after his maiden trip to Berlin, Prime Minister Alexis Tsipras is on the road again, this time heading to the heart of Greece's eastern hegemon. On Wednesday, the 40-year-old premier will sit down for his first official meeting with Russian counterpart President Vladimir Putin at the Kremlin. The timing is not fortuitous."
Fears of a Leftist alliance with Putin's Russia first emerged after Syriza's landslide election win in late January. The nascent government moved to quickly condemn economic sanctions placed on Moscow.
In a nod to their long-standing historical ties, Mr Tsipras's Moscow trip was announced as Greeks marked the anniversary of their foundational War of Independence, when Tsar Alexander I allied with the Mediterranean state to throw off three centuries of Ottoman rule.
The dalliance with Kremlin has since intensified as Greece's creditor show no signs of lessening the squeeze on the country.
Ahead of his visit, a defiant Mr Tsipras revived calls for the EU to halt sanctions and open up diplomatic channels with the Kremlin. In a hint at Greece's simmering tensions with Brussels, the Syriza leader attacked economic warfare as a "dead-end policy".
It remains to be seen if and how much use Russia and China may have for Greece and a foothold in Europe, however with Greek money gone, things will move fast.
Away from Greece, whose future remains in limbo, the biggest development over the holiday weekend [27]was a Goldman note in which the central-bank friendly firm launched the first trial balloon against rate hikes, and using an "analysis" conducted on the Fed's own FRB/US reality simulator, determined that "it is hard to be “reasonably confident” in the inflation outlook given current economic conditions, unless several inflation drivers rise at the same time. We therefore do not have much confidence in the inflation outlook and believe that the right policy would be to put hikes on hold for now."
This catalyzed a jump in gold, which reached the resistance band in the mid-$1220s overnight before once again finding paper selling pushing it lower. A breakout here may lead to a huge short squeeze as noted yesterday courtesy of a record number of gold shorts.
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It is unclear if this open hint toward the end of easing season is what catalyzed it, or whether the realization that there is no Iran "deal" but merely a framework which will be gutted over the coming months and in the process likely undo any "oil embargo" progress, but overnight WTI has jumped and at last check was trading back over $50 once again. Late on Thursday a joint statement from parties involved in nuclear talks over Iran stated sufficient progress had been made to keep negotiations ongoing until 30th June and Iran's Tasnim said that banking and oil sanctions to be removed after the deal has been agreed which caused selling pressure in crude futures into the NYMEX pit close. However, since then WTI and Brent prices have been supported by the weaker USD as well as news that Saudi Arabia have increased their official selling prices for all Asian exports during May. Furthermore, the latest CFTC data shows that bullish bets on oil have been increased by the most in four years.
In FX markets, the USD remains roughly near its post-NFP lows after the latest jobs report from the US showed a substantial miss on the headline and subsequently pushed back expectations for a Fed rate hike. Elsewhere, with European participants away from market, things remain relatively subdued, although EUR has been granted some reprieve after promising developments regarding Greece despite the latest CFTC data showing record shorts for EUR.
The coming week, as is traditional following NFP, will be quieter than normal, with all eyes today on Non-mfg ISM at 10:00 am expected to print down from 56.9 to 56.5 (with the Markit PMI serving as a humorous and once again totally disconnected from reality foil). If this is indeed the "kitchen sink" period, expect a major downside "surprise" in this latest soft-data report. Also on deck today is the Labor Market Conditions Index.
Bulletin Headline Summary from Bloomberg and RanSquawk
- Friday’s NFP headline fell short of expectations, leading to selling pressure in USD and US equities, while bolstering treasuries
- Over the weekend, Greece confirmed they will make their April 9th repayment to the IMF
- While Europe remains away from market, today’s session will see notably lower volumes than normal
- Treasuries steady after Friday’s rally on worse-than-expected March payrolls (+126k vs +245k estimate); New York Fed’s Bill Dudley to speak this morning on economic outlook.
- Conviction that Fed might raise rates mid-year fades after weak payrolls; some economists reserving judgment to see whether further data confirm stalling growth
- While policy makers are suggesting there’s something wrong with UST yields that aren’t climbing as the economy recovers, traders are signaling there’s little reason yields can’t, and won’t, stay depressed
- The Fed has “been wrong for so long,” said Jeffrey Gundlach; “Their incremental input in what will happen in the future has been literally of no value, because the market’s pricing has been closer”
- Saudi Arabia raised official crude oil prices for Asia for a second straight month as refining margins improved; the country’s oil minister said global demand was improving as lower prices boost use
- Greece is stepping up efforts to find allies in the U.S. and Russia as cash reserves run dry while an agreement on additional funding from the country’s euro partners still looks like weeks away
- Yemen’s Houthi movement is ready to resume talks to resolve the country’s crisis if the Saudi-led military coalition stops airstrikes, though it won’t accept the kingdom-backed deposed president returning to power
- Iran’s military chief congratulated Supreme Leader Ayatollah Ali Khamenei for negotiators’ success in reaching a nuclear agreement with six world powers, in an open backing of President Hassan Rouhani’s government
- Obama said engaging with Iran on a nuclear accord doesn’t mean the U.S. will forfeit its military superiority or fail to protect Israel
- Mizuho plans to hire as many as 200 people from RBS in the U.S. as part of its deal to buy loans from the British lender, a person with knowledge of the matter said
- Japan stocks rise; European markets closed. U.S. equity- index futures decline. Crude and gold higher, copper falls
US Event Calendar
- 8:30am: Fed’s Dudley speaks in Newark, N.J.
- 9:45am: Markit US Composite PMI, March final (prior 58.5)
- Markit US Services PMI, March final, est. 58.6 (prior 58.6)
- 10:00am: Labor Market Conditions Index Change, March (prior 4)
- 10:00am: ISM Non-Mfg Composite, March, est. 56.5 (prior 56.9)
