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US Futures, European Stocks Rebound, Bonds Fall Ahead Of US Data Deluge

The overnight session started with more weakness out of Asia, where chatter that the BOJ may end up doing nothing despite all the trial balloons (as we hinted yesterday), sent the USDJPY sliding, pushing the Nikkei lower, leading to a 7th consecutive decline in the Topix, the longest such stretch since 2014 even though the BOJ is now actively buying a record amount of ETFs. However, the modest dip in S&P futures and European stocks proved too much for BTFD algos, and risk promptly rebounded.

Key Events In The Coming "Fed Blackout" Week

The spotlight turns to US data and Fed speakers ahead of the Fed blackout period this week. The BoE and SNB meet to decide policy but consensus expect no change from either. Elsewhere we get inflation data from the US, UK, Sweden & EZ (F), Q2 GDP from NZ & SW and labor market data from the UK & AU.

Incompetent But Not Weak: "The Fed Doesn't Know Whether To Shit Or Go Blind"

The outlook for the US economy is deteriorating, yet the Fed is trying to raise overnight rates to keep unseen inflation from rising. Success in its strategy could force consumption lower, unemployment higher, and exacerbate real output contraction. The market, however, should not underestimate the Fed’s power based on its apparent incompetence.

Fed's Beige Book Repeats "Modest Economic Growth", No Rate Hike Odds Reaction

The Fed's most boring report, the Beige Book, once again offered its ubiquitous "modest" to "moderate" growth outlook with little insight into whether the Fed is considering any rate hike in the immediate future. On the topic of wages, the Fed said that "Upward wage pressures increased further and were moderate on balance, with more rapid gains reported for workers with selected specialized skill sets. Price increases remained slight overall"

Albert Edwards Sees Shades Of 2007 In The Biggest Risk Facing The US Consumer

"The only thing keeping the US out of recession is the US consumer (see chart below). It is difficult to say consumption is driving the economy forward ? rather it is like a woodwormridden crutch creaking under the strain of holding up a deadweight economy. This  recovery ? the fourth longest in history ? is surely nearing its end."

Futures Flat, Global Stocks Rise As Treasury Yields See Biggest Monthly Jump In Over A Year

The August market doldrums were on display on the last day of the month as S&P futures were fractionally lower on non-existent volume, while both Europe and Asia were modestly in the green; ten-year Treasury yields headed for the biggest monthly jump in more than a year while the dhe dollar gained for a sixth day against the yen in the longest winning streak since March. European stocks advanced for a second day, adding to a monthly gain as oil trimmed its advance in the best month since April.

Recession Odds Spike To 37%, JPM Calculates, Highest Yet For This Cycle

While not as dire as the recent analysis by Deutsche Bank, overnight JPM released its latest recession probability analysis, and - somewhat unexpectedly following the last two stellar job reports and a full court political press that the recovery has rarely been stronger going into the election - now sees a 37% chance of a recession in the next 12 months. This is the highest recession probability calculated by Jamie Dimon's bank during the current economic cycle, and matches the odds first laid out in early July.

Bad Data, Broader Alarms, And Business Cycles

The economy is pointing downward with alarms ringing in a wider and broader variety of important economic accounts. From this view, it is no wonder the FOMC overreacted to the May payroll report; that’s all that is left as it is more and more isolated.