Janet Yellen at the Federal Reserve believes that the partying on Wall Street and in the financial institutions may “lead to trouble”.
The big news overnight was neither the Chinese manufacturing PMI miss nor the just as unpleasant (and important) German manufacturing and service PMI misses, but that speculation about a rate hike continues to grow louder despite the abysmal economic data lately, with the latest vote of support of a 25 bps rate increase coming from Goldman which overnight updated its "Fed staff model" and found surprisingly little slack in the economy suggesting that the recent push to blame reality for not complying with economist models (and hence the need for double seasonal adjustments) is gaining steam, and as we first suggested earlier this week, it may just happen that the Fed completely ignores recent data, and pushes on to tighten conditions, if only to rerun the great Trichet experiment of the summer of 2011 when the smallest of rate hikes resulted in a double dip recession.
Futures Flat With Greece In Spotlight; UBS Reveals Rigging Settlement; Inventory Surge Grows Japan GDPSubmitted by Tyler Durden on 05/20/2015 07:00 -0400
The only remarkable macroeconomic news overnight was out of Japan where we got the Q1 GDP print of 2.4% coming in well above consensus of 1.6%, and higher than the 1.1% in Q4. Did it not snow in Japan this winter? Does Japan already used double, and maybe triple, "seasonally-adjusted" data? We don't know, but we do know that both Japan and Europe have grown far faster than the US in the first quarter.
Less than a week ago, fresh from the aftermath of the recent dramatic six-sigma move in German Bunds, one of Europe's largest banks openly lamented that so far the ECB's QE had done absolutely nothing: "two months of QE for nothing." And lo and behold, as if on demand, overnight the ECB confirmed it had heard SocGen's lament when just before the European market open, ECB executive board member Benoit Coeure delivered a speech at the Brevan Howard Centre for Financial Analysis (appropriately named after a hedge fund) at Imperial College Business School (not to be confused with the July 26, 2012 Mario Draghi "whatever it takes" speech which also took place in London) in which he said that the ECB intends to "frontload" i.e., increase, its purchases of euro-area assets in May and June ahead of an expected low-liquidity period in the summer.
- The fake: Avon-Offer Hoax Shows It’s Easy to Put One Over on SEC’s Edgar (BBG)
- And the real: US buyout group TPG snaps up UK discounter Poundworld (FT)
- El Niño near-certain to last through summer: U.S. climate center (Reuters)
- Oil Sands Land Becomes Alberta’s Hot Real Estate as Oil Rebounds (BBG)
- SEC a stumbling block in banks' forex guilty pleas: sources (Reuters)
- Pimco’s Stocks Chief Maisonneuve to Leave as Funds Closed (BBG)
- Bank of America’s Woes Test ‘Fixer’ CEO (WSJ)
- Puerto Rico Governor, Lawmakers Agree on Revenue Proposal (BBG)
Germany throws its support behind a Greek referendum on euro membership while Putin invites Athens to join BRICS Bank. Meanwhile, Yanis Varoufakis has a plan for resolving Greece's debt problem — and he imagines the ECB chief is terrified of it.
The oil market rebalancing has started: weak prices in 1Q15 pushed producers to cut capex while supporting demand. But, as Goldman Sachs details below, while the rally in oil prices has closed the valuation gap to equities, these trade on historically high multiples and oil itself is now trading at a premium to its own still weak fundamentals in their view. Goldman therefore views this rally as derailing this rebalancing and setting the stage for sequentially weaker prices, especially with oil speculative length as long as when oil traded at $100/bbl.
We have called this a tale of two graphs. But what it really describes is a clear and present danger to American capitalism fostered by an unelected monetary politburo in thrall to its own lust for power and mesmerized by its own doctrinaire group think. The tragedy is that nothing can stop them except the thundering crash of the gargantuan bubble they have single handedly enabled.
It all started again in Asia, although not in China where the berserker mania bid for stocks has returned and the SHCOMP is now up nearly 5% in the past two days following the PBOC's latest easing, but in Japan where once again the massively illiquid JGB market, of which the BOJ owns roughly a third as of this moment, is going through yet another shock period (if not quite VaR yet) with last night's 10 Year JGB auction seeing the lowest Bid to Cover since 2009. This was the beginning, and promptly thereafter bond yields around the globe spiked once more, with 10-year Treasury yields climbing to a five-month high, as the global rout in debt markets deepened. The biggest casualty so far is the Bund, which having retraced some of the flash crash losses from two weeks ago is once again in panic selling mode, and while not having taken out the recent 0.8% flash crash wides, traded just shy of 0.75% this morning.
Hillary Clinton's family charities failed to live up to transparency promises made to the Obama administration during her tenure as Secretary of State, Reuters reports, noting that disclosures related to foreign donors are still not available on the Clinton Foundation's website. Meanwhile, New York Magazine tells the story of how the Foundation attempted to bully an influential charity monitor after winding up on its 'naughty' list.
Today’s Eurogroup meeting will be key in determining where Greece and its creditors negotiations currently stand. Over in the US today, it’s the usual post payrolls lull with just the labor market conditions data expected.
In the coming months, however many hours Clinton spends introducing herself to voters in small-town America, she will spend hundreds more raising money in four-star hotels and multimillion-dollar homes around the nation. The question is: "Can Clinton claim to stand for 'everyday Americans,' while hauling in huge sums of cash from the very wealthiest of us?" This much cannot be disputed: Clinton's connections to the financiers and bankers of this country - and this country's campaigns - run deep. As Nomi Prins questions, who counts more to such a candidate, the person you met over that chicken burrito bowl or the Citigroup partner you met over crudités and caviar?
Auto sales have recovered to the 16.5-17 million range, and many observers predict further gains in coming years (despite, as we previously noted, missing expectations for the last few months). But to Goldman Sachs, the current sales pace already looks high relative to the medium-term fundamentals; and their assessment of scrappage rates, population growth, licensed drivers, and vehicle ownership suggests that trend demand for autos - excluding cyclical fluctuations - is only 14-15 million units per year.
The UK General Election will be held tomorrow. The polls close at 10 pm. We should have a pretty clear picture of the overall seat count by 5 to 6 am on Friday morning. The result, as SocGen notes, is almost certain to be a hung parliament. Then the fun will really start. However, at the macro level the implications of the election may be less pronounced than many anticipate. Monetary policy has been de-politicised through the BoE’s independence, the formation of a coalition government is likely to involve convergence towards centrist positions, and a minority administration that pursues policies outside the mainstream would be unlikely to survive given its fragile parliamentary basis. In either case, the political system is unlikely to deliver radically different macroeconomic outcomes.
Greece is set to introduce a surcharge on withdrawals and financial transactions in an effort to raise cash amid fractious negotiations with creditors. Meanwhile, the ECB is considering measures that will tighten the screws on the country's cash-strapped banking sector.