"We really want to stay away from positions we can’t get out of"...
15 minutes ago we had a miss from the Markit Service PMI, and now it is the turn of the ISM's non-manufacturing survey to also miss, rising from 55.7 to 56.0, below the 56.4 consensus increase. The reason: trade (both - imports and exports - disappointed with Imports dropping into outright contraction down from 53.5 to 48.0, while employment dipped from 55.3 to 52.7. Finally, here are the respondents who after blaming winter, port strikes, drought and flooding have found a new scapegoat or rather scapebird: avian flu.
Following last week's disappointing manufacturing PMI, today it was Markit's turn to report the June Service PMI, which just came out at 54.8, just under the 54.9 expected, down from 56.0 in May and the lowest reading since January. Additionally, job creation eased to a three-month low while input cost inflation reaches its highest since October 2013. In other words, more bad news for future job prospects and margins.
Tumbling Futures Rebound After Varoufakis Resignation; Most China Stocks Drop Despite Massive InterventionSubmitted by Tyler Durden on 07/06/2015 05:52 -0500
More than even the unfolding "chaos theory" pandemonium in Greece, market watchers were even more focused on whether or not China and the PBOC will succeed in rescuing its market from what is now a crash that threatens social stability in the world's most populous nation. And, at the open it did. The problem is that as the trading session progressed, the initial 8% surge in stocks faded as every bout of buying was roundly sold into until every other index but the benchmark Shanghai Composite turned sharply red.
Despite much hopeful banter among the mainstream media, Goldman forecast nonfarm payroll job growth of 220k in June, notably below consensus expectations of 234k. This is roughly in line with Goldman's expectations for below average job growth over the remainder of 2015. Employment indicators were mixed in June: reported job availability, the employment components of most manufacturing surveys, and ADP employment growth improved, but jobless claims and job cuts both rose slightly and online job ads declined. Overall, the June data point to a gain below the very strong 280k increase in May.
Following Construction Spending's exuberant 2.2% MoM surge in April (revised to 2.1), May saw a fall-back-to-earth 0.8% gain (still better than expected). However, while Markit's Manufacturing survey tumbled, ISM's rose in May and now in June picked up again to 53.5 - its highest since January. Employment rose notably but New orders were only marginally higher and Production slowed. Rather stunningly, all the improvment in ISM is seasonal adjustments with the non-seasonally-adjusted data at its lowest since January. The question remains, is this good news enough to warrant a September rate cut - if we ignore everything else that is weak?
"Strong Fundamentals" Meme Destroyed As US Manufacturing PMI Slows To Its Weakest Since October 2013Submitted by Tyler Durden on 07/01/2015 08:54 -0500
US Manufacturing PMI's final print for June at 53.6 (slightly above its preliminary 53.4 print) is its lowest since October 2013. The survey has fallen almost non-stop since the end of QE3. Under the covers, data was mixed, softer output growth was offset by a slight pick-up in the pace of new business gains and job creation, but Manufacturers indicated a slowdown in production growth for the third month running during June. As Markit's echief economist notes, “Policymakers will be concerned about the unbalanced nature of growth, and in particular the loss of export and investment drivers, and will want to see growth pick up again in coming months before committing to higher interest rates.”
So much going on that by the time an article is prepared, everything has changed and it has to be scarpped. But, in any event, here is an attempt to summarize all that has happened in another turbulent overnight session.
As we previously noted, liquidity is there when you don't need it, and it promptly disappears once it is in demand. Consider it "cocktease capitalism." If liquidity lasts longer than 4 hours, call the CFTC because you may be experiencing a spoof. Right now, the ultimate spoof is setting up as the credit default swap market collapses, and a global bond market margin call is just around the corner.
What to expect next week.
"If you are a sizeable bank that wants to do more business in China you don't want to make parts of the Chinese government angry"...
Missing by the most on record (as serial extrapolators expected a rise to 56.5), Markit US Services PMI (following weakness in the Manufacturing PMI) printed 54.8 - the lowest since the middle of weather carnage in January. As Markit notes, with the exceptions of the weather-related slowdown at the turn of the year and the 2013 government shutdown, June saw the weakest pace of economic growth since May 2013 as the Composite PMI slipped to 54.6 - its lowest since January 2015 (as employment tumbled and cost burdens surged the most since Oct 2013). As Markit conludes, hopes for a 3.00% growth are receding as "there has clearly been a loss of momentum in recent months."
Chaos reigns, with contradictory headlines pushing and pulling futures in any one direction, only for the next headline to undo the previous one. And only headline scanning frontrunning algos have any chance of trading any of this...
With a DoJ probe having predictably gone nowhere, a group of pensioners and retirement funds are suing Wall Street and Markit for colluding to monopolize the CDS market. Amusingly, Citadel has been subpoenaed to discuss how it was shut out of creating a CDS trading platform by the "oligopolistic" activities of TBTF banks, even as the firm looks set to dominate the market for IR swaps.
Having hovered at its lowest level since January 2014, Markit's US Manufacturing PMI slipped even further to 53.4 (against expectations of 54.1). This is the weakest since October 2013 and the biggest miss since August 2013. Stunned, Markit notes, "while the survey data points to the economy rebounding in the second quarter, the weak PMI number for June raises the possibility that we are seeing a loss of momentum heading into the third quarter;" which is odd because every talking head has been proclaiming everything is awesome, "while a September rise still looks likely, given the ongoing strength of the service sector, any further deterioration in the data are likely to push the first hike into next year."