Consumer Confidence

• ECB Cash Averts ‘Funding Crisis’ for Italy, Spain (Bloomberg)
• Bailout talks in Greece ‘crucial’, Premier says (WSJ)
• Spain sees €50bn of new bank provisions (FT)
• Fed says expand Fannie, Freddie role to aid housing (Reuters)
• France’s Borrowing Costs Rise at Bond Sale (Bloomberg)
• Europe worries linger after French auction (Reuters)
• PBOC Suspends Bill Sale as Money Rates Rise Before Holiday (Bloomberg)
• Turkey warns against Shi'ite-Sunni Cold War (Reuters)
• New capital rules for banks ‘delayed to 2H’(China Daily)

UPDATE: EFSF said to get EUR4bn of orders for 3Y issue is providing some cover (at what rate? We offer to buy 1tn at 300% yield...)

With plenty of time left until France unleashes its supply (and a dismal consumer confidence print earlier), there is a plethora of notable market moves: Unicredit is halted down 7.9% (seems to be the culprit for the initial risk-off turn in Europe), but Deutsche Bank is down over 5% on liquidity problem rumors, EURUSD traded under 1.2850 at its lowest level since September 2010, 10Y Italian bonds have pushed well above 7% yields and 510bps spread to Bunds as Unemployment rises to 8.6%, Belgian 10Y yields are over 4.5% - highest in 3 weeks, and the rest of European Sovereigns are all leaking wider (near wides of the year). Risk assets (CONTEXT) broadly are under pressure but ES (the S&P 500 e-mini futures contract) is holding off yesterday's early morning lows for now. Commodities are all dropping fast with Gold (actually outperforming in this slide) back at $1615, Oil at $102.50, and Copper approaching $340. Treasuries are bid but trading in line with Bunds' movements so far in general. Some chatter of ECB buying in the last few minutes is stabilizing things a little here.

The new year’s worldwide economic downturn has an interlocking effect: every national economy is searching to accommodate itself politically as well as economically to what looks to be an extended period of low growth. After longer or shorter periods of historically unrivaled prosperity, they are feeling for a “bottom” – a level to wait out new growth. That is the proverbial “soft landing”.

Following today's release of European manufacturing PMI data we are sadly no closer to getting any resolution on which way the great US-European divergence will compress. Because all we learned is that, very much as expected, Europe managed to contract for a fifth month in a row, with the average PMI in Q4 2011 the weakest since Q2 2009, essentially guaranteeing a sharp recession once the manufacturing slow down spills over to GDP. The only silver lining was that the contraction across the continent was modesty better than expected, however if this merely means that the band aid is being pull off slowly and painfully instead of tearing it off is up for question.

The somewhat incredible rise in consumer confidence this morning is the largest absolute jump since April 2003 from prior revised 40.9 to 56. On a percentage basis, only the April 2009 reversion was higher as this represents a 4 standard deviation elevation from its long-term mean. Of course, its all about expectations, as the sub-index jumped from 50 to 67.8 - which is still only back to July 2011 levels.

So much for the US consumer confidencing [sic] his way up to buying houses and other stuff. even with 2000x leverage. According to the Conference Board, October Consumer Confidence, plunged from a downward revised 45.4 to 39.8, the lowest since March 2009. The forecast looked for an increase to 46.0. Current conditions were even more horrendous, dropping to 26.3. And with crude on its way back to $100 (thank you Dudley) and gas back to $4.00, this number is not going higher any time soon. But wait, there's more: the jobs plentiful dropped from 5.5 to 3.4, jobs hard to get also dropped from 50 to 46.1, and the cherry on top is that 1 Year inflation expectations are, well, anchored at 5.8% versus 5.7% previously.

The UMichigan read for consumer confidence came slightly better than uber-depressionary, printing at 57.8, on expectations of 57, and better than the apocalyptic 55.7 from August. To put the number in perspective, it is the second lowest since February 2009. To algorithms all that will matter, however, is that it is rising. What they will completely ignore is that consumer expectations, or the outlook for the future, just dropped yet again, from 47.4 to 47, the lowest print since May of 1980! More troubling to the Fed is the read on inflation expectations, which after declining for months, rose in both 1 year (from 3.5% to 3.7%) and 5 year (from 2.9% to 3.0%) expectations.

August consumer confidence plummets from 59.2 to 44.2, far below consensus of 52, dropping to its lowest level since April 2009. But, but, two insolvent Greek banks merged yesterday to make a really big insolvent Greek bank. Oh well: Americans don't care. And even uglier is the 6 month outlook chart which collapsed from 74.9 to 51.9, one of the biggest monthly drops in history. This sets the stage for the ISM, for NFP, for further GDP cuts, and for September 21.

Quiet day with FOMC minutes due out in the afternoon, Case Shiller confirming more worsening in housing, and Conference Board consumer confidence plunging in August. European headlines may once again reappear.

But the administration - despite its rhetoric - is doing nothing to decrease unemployment, and is solely helping the super-rich at the expense of everyone else ...

UMichigan consumer confidence just printed at 54.9, on expectations of 63.0. This is the lowest since May 1980. And what's worse, inflation expectations were unchanged. Looks like those high inflation expectations are starting to get anchored. In the meantime, with the Chairsatan saying to expect at least two more years of recession, is this really a surprise to anyone?

The adverse data onslaught continues with both the Chicago PMI and the UMichigan Consumer Confidence numbers coming in weaker than expected. Chicago printed at 58.8 on expectations of 60.0, down from 61.1, while consumer confidence was quantified with laser-like precision by UMichigan at 63.7, below expectations of 64.0, and the lowest since March 2009. The data behind the headlines was even uglier, as the Employment index in the PMI printed far lower, from 58.7 to 51.5, even as priced paid increased (yes, inflation) from 70.5 to 71.7, while new orders declined from 61.2 to 59.4. At the same time long-term inflation expectations are getting anchored ever higher, as the 5 year inflation rose from 2.8% to 2.9%, while the condition index plunged to 75.8, the lowest since November 2009. At least people's outlook on the future was unchanged at 56.0. Then again, all economic data is now irrelevant as everyone is preparing to listen to the republicans, the teleprompter and the democrats in that order imminently.

After yesterday's economic data drought, today brings the flood as we get new home sales and Case-Shiller prices, consumer confidence and the Richmond Fed index. We also get a small POMO as part of QE Lite and also two bill and one note auctions, sucking a combined $73 billion in capital out of the market.

In true bizarro fashion, the latest catalyst for the stock jump is the latest miss in UMichigan consumer confidence, which missed expectations of a rebound from May's 71.8 to 72.0, instead printing at 71.5, dashing our hopes that there would be more BS-base baffling. In doing so, UMich has confirmed the Conference Board's indication that consumers are now less confident, despite a substantial drop in gas prices in the last month (a decline which has now been largely reversed). More importantly, 5 year inflation expectations continue to be firmly lodged in and came unchanged from last month at 3.0%. 1 year inflation expectations however did drop from 4.0% to 3.8%, a number which will likely reverse if gas prices continue trending straight up. And now, all eyes on the ISM.

According to crossing headlines, US Consumer Confidence per the Conference Board, which was expected to print at 10:00am, has come out at 58.5, on expectations of 61.0 and down from 61.7. It is unclear if this is due to an embargo breach, but this is the number for what its worth. Not even the HFT algos could front run a fully leaked number. The index components were worse on both counts: present situation was down from 39.3 to 37.6, while expectations dropped from 76.7 to 72.4. Naturally, this number only has an impact on the market when it show improvement so the embargo break will likely be promptly forgotten.