While headlines are flashing red about how exuberant the consumer is, there appears to be some 'new normal' oddness under the covers. Projecting this positive news into the future (as every talking-head is) does not add up with the fact that "plans to buy a car" and "plans to buy a major appliance" both tumbled in July. But the biggest problem for the 'recovery', "plans to buy a home" collapsed to its lowest since Feb 2013... perhaps not a total surprise when 77 million Americans have debt past due. Welcome to the new normal definition of confidence.
Overnight markets have been a continuation of the relative peace observed yesterday before the onslaught of key data later in the week, with the biggest mover standing out as the USDJPY, which briefly touched 102 before sliding lower then recouping losses. This sent the Nikkei 225 up 0.57% despite absolutely atrocious Japanese household spending data, coupled with a major deterioration in employment: at this rate if Abenomics doesn't fix the economy it just may destroy it. Aside from that the last 24 hours could be summed as having a lot of noise but not a lot of excitement. This was best illustrated by the S&P500’s (+0.03%) performance which was the second smallest gain YTD. And while the SHCOMP is starting to fade its recent euphoria and China was up only 0.24%, Europe continues to cower in the shade of Russian sanctions as both German Bund yields rose to record highs, and Portugal's BES tumbled by 10% once again to 1 week lows. Today Europe is expected to formally reveal its latest Russian sanctions, which should in turn push Europe's already teetering economy back over the edge.
Despite an early dump on dismal data, US equity markets (except Trannies) 'v-shape-recovery'ed back up to unchanged or better (as Europe closed and POMO ended) on the heels of an increasingly more beta-sensitive AUDJPY rampfest. Trannies never really recovered (3rd down day in a row) and Russell was less exuberant in its dead-cat-bounce but the Dow and S&P closed very modestly green. High-yield credit markets continue to widen - now at 10-week wides (up 35bps from tights) - notably divergent from stocks. Away from the shenanigans in stocks, the USD ended unchanged; Treasury yields were up 1-2bps; and gold closed very modestly lower. Oil slipped 0.5% to $101.60. VIX closed unch. Only the Nasdaq is green post MH17 Headlines on 7/17 and The Russell 2000 is -1.9% and Homebuilders -9% year-to-date.
Well that escalated quickly. Friday's micro (earnings-based) weakness has extended to today's macro weakness and removed any "ignore the geopolitics, just buy the dips"-exuberance. All US equity indices are once again below the levels pre-MH17 headlines with the Dow and Russell 2000 worst performers. It appears investors need some reassurance that Yellen's "price-equity" ratio is still 'fair'.
With "recoveries" like these who needs staged, false flag conflicts and wars covering over 10% of the globe? Well, socialist France for one which moments ago announced that total jobless rose from 3.389 million to 3.398 million, a new record high. Surprisingly, while the year-over-year unemployment change for people under 25 declined by 3.1%, it was workers 25-49 which saw a material 3.3% increase in joblessness, but it was workers aged 50 and older that saw a veritable surge in unemployment, rising by 11.5% from a year ago. Surely, just like in the US, this is due to young people retiring in droves.
Curious why Brent just spiked by over 1% (and the S&P500 took a leg lower)? The reason is headlines from Reuters citing Europe's unellected dictator, Van Rompuy who has said that sanctions should include Oil technology. However, in a hilarious twist, the unellected muppet of Europe's insolvent banks, hopes to get his sanctions cake and snort Russia's gas too, adding that Europe's sanctions should exclude the gas sector.
- LETTER FROM EU COUNCIL HEAD VAN ROMPUY TO MEMBER STATES SAYS RESTRICTIONS ON SUPPLYING TECHNOLOGY TO RUSSIA SHOULD INCLUDE OIL, BUT EXCLUDE GAS SECTOR-EU SOURCES
Here it appears that Europe's unelected leaders are somehow deluding themselves that if faced with escalating sanctions, Russia will not unilaterally cut off the gas to Europe.
The Obama Administration’s Orwellian government employee snitch network, dubbed the “Insider Threat Program,” first made headlines about a year ago. Fast forward a year, and it appears that several members of Congress are also becoming increasingly concerned. Some are starting to ask questions, but as usual, the “most transparent administration in history” is entirely nontransparent. What is clear since the Edward Snowden revelations is that the government has zero interest in reining in these programs. It merely wants to make sure the public can never learn about government criminality in the future. Hence the aggressive “war on whistleblowers.”
Treasury yields pushed 4-5bps higher on the day - the worst in 3 weeks - as yesterday's test of 2014 lows saw some reactive bond-selling. Asian and EU PMIs sent stocks to record-er highs but absymal US PMI and housing data took the shine off the exuberance early on (despite the best efforts at a 5th short-squeeze ramp at the open in a row). AUDJPY was in charge of stocks once again helping the S&P desperatly cling to unchanged. Espirito Santo bankruptcy headlines stumbled stocks at around 1300ET (but that dip was bought). The USD rose modestly (now up almost 0.5% on the week) led by GBP and EUR weakness but that was nothing compared to the dumpfest in precious metals. Silver's worst day in 6 months and a big drop in gold retraced them to near June FOMC levels. Credit markets continue to diverge bearishly from stocks (now 30bps wider than the tights as stocks rally to new highs). Despite the ubiquitous late-day ramp, stocks ended the day mixed around unchanged (and VIX higher on the day). By the close the S&P 500 closed +0.045% to a new all-time-record high.
Ever since going public, it appears that Markit's giddyness about life has spilled over into its manufacturing surveys: after a surge in recent Markit mfg exuberance in recent months in the US, it was first China's turn overnight to hit an 18 month high, slamming expectations and fixing the bitter taste in the mouth left by another month of atrocious Japan trade data (where even Goldman has thrown in the towel on Abenomics now) following which the euphoria spilled over to Europe just as the triple-dip recession warnings had started to grow ever louder and most economists have been making a strong case for ECB QE. Instead, German July mfg PMI printed at 52.9, above the 52.0 in June and above the 51.9 expected while the Composite blasted higher to 55.9, from 54.0, and above the 53.8 expected thanks to the strongest Service PMI in 37 months! End result: a blended Eurozone manufacturing PMI rising from 51.8 to 51.9, despite expectations of a modest decline while the Composite rose from 52.8 to 54.0, on expectations of an unchanged print. Curiously the soft survey data took place as Retail Sales declined both in Italy (-0.7%, Exp. +0.2%), and the UK (-0.1%, Exp. 0.3%), which incidentally was blamed on "hot weather." Perhaps Markit, now that it has IPOed successfully, can step off the gas or at least lobby to have surveys become part of GDP.
When it comes to the apocalypse, Krugman likes to have his apocalyptic cake and eat it too. Krugman says that the recent concern about “debts and deficits” was a “false alarm.” He attempts to paint those who were concerned about the debt crisis as scare mongers. He sarcastically says that “the debt apocalypse has been called off.”
On a day with no macro data and more warmongering, it only makes sense that stocks should continue to levitate. Aside from The Dow (troubled by weakness in Boeing dragging 20 points off the index), US equity markets rose with the S&P 500 breaking to new all-time record highs just shy of 1990 (2000 tomorrow?) Treasuries were very quiet, trading in a 2bps range and ending basically unch. Gold and silver limped lower (but were also quiet) as the USD pushed modestly higher (with AUD strength on the inflation print overnight the big story). Oil prices recovered yesterday's losses closing back above $103. Biotechs were a notable mover (on M&A hopes) as they retraced all Yellen's warning losses. This is the 3rd day in a row that "most shorted" stocks were snap-squeezed higher at the open.
Judging by the total lack of reaction across any markets, traders are just as confused by the headlines blurting out of Hamas leader Mashaal:
- *SENIOR HAMAS OFFICIAL SAYS TRUCE TO BE ANNOUNCED SOON (ok great)
- *MASHAAL SAYS 'WE ARE FOR A TRUCE BUT WE ARE PATIENT' (wait... you just said)
- *MASHAAL SAYS NOBODY CAN DISARM PALESTINIAN RESISTANCE (hhmm)
- *MASHAAL SAYS HAMAS SEES 'NO REAL BREAKTHROUGH' IN TRUCE SEARCH (wait what?)
So there may be a truce, there may not be... Mashall adds "we are ready to accept a humanitarian truce" but any truce "must" mean a lifting of the embargo on Gaza; oh and "nobody can disarm the Palestinian resistance... does not sound too hopeful.
Argentina Debt "Mediation" Goes Surreal As Neither Side Turns Up For Meeting, Black-Market Peso TumblesSubmitted by Tyler Durden on 07/23/2014 14:02 -0400
Despite Judge Griesa's demands that the holdouts and the Argentinian government hold "continuous" mediation until the debt conflict is resolved "or fear the worst," this morning's headlines are somewhat surreal:
*NEITHER SIDE IN ARGENTINE DEBT CONFLICT HAS ARRIVED TO MEETING
Argentina decided not to send the economy minister (just a 'delegation') as BTG analysts warn that "all the music from the Argentine government indicates default," and judging by the tumble in Argentina's black-market Peso (Dolar Blue) the last few days, that risk is starting to rise.
Despite yesterday's lackluster earnings the most recent market levitation on low volume was largely due to what some considered a moderation in geopolitical tensions after Europe once again showed it is completely incapable of stopping Putin from dominating Europe with his energy trump card, and is so conflicted it is even unable to impose sanctions (despite the US prodding first France with BNP and now Germany with the latest DB revelations to get their act together), as well as it being, well, Tuesday, today's moderate run-up in equity futures can likely be best attributed to momentum algos, which are also rushing to recalibrate and follow the overnight surge in the AUDJPY while ignoring any drifting USDJPY signals.
A hot CPI and better-than-expected home sales was all that was needed (aside from USDJPY and VIX pumps) to send the S&P 500 and Trannies to new all-time intraday record highs. Escalating sanctions threats and death tolls be buggered... this is going to the moon, Alice. Treasuries were less than exuberant and rallied 4bps off their high yields of the day (i.e. totally disconnecting from stocks) and even USDJPY decoupled through the middle of the day. The USD rose 0.3% (biggest jump in 3 weeks) testing up towards 5-month highs. Gold and silver were dumped, pumped, and then dumped as CPI and housing data hit to end the day mixed. Credit rallied but diverged again this afternoon and remains wider post-MH17. VIX closed back below 12. Only the Dow remains modestly red since MH17 headlines hit last week and in spite of all this exuberance The Russell 2000 remains -0.5% year-to-date.