As global growth expectations collapse, so do bond yields (now at new record lows for developed markets) but that doesn't stop equity 'investors' from piling into already richly-valued stocks on the hope that next year will be the year when global macro and micro hockey-stick projections will work out...
In a surprising twist, today's JOLTS report revealed that while job openings continued rise, and in fact hit a record high. actual hiring slowed down substantially: at 5.092MM new hires in the month of April, this was the lowest since September of 2015. As the chart below, which correlates the 12 month change in NFPs to hires, the labor market may indeed be rolling over.
When the machines saw that US crude production rose by the most since Jan 1st, prices plunged back below $51... but the machines didn't like that, and following last night's API-reported draw, DOE confirmed the 3rd weekly drop in inventories for overall crude and Cushing (the latter more than expected) which juiced oil prices back higher. However, DOE also showed considerably larger than expected builds in Gasoline and Distillates (biggest in 2 months).
Today is a historic day for the corporate bond market: with the launch of the ECB's CSPP, Mario Draghi is now directly buying European investment grade non-financial bonds. This means that no longer will European corporate bonds trade based on their fundamentals, but purely on expectations of frontrunning future ECB purchases, such as the following...
"One of the intercepting Chinese jets had an unsafe excessive rate of closure on the RC-135 aircraft. Initial assessment is that this seems to be a case of improper airmanship, as no other provocative or unsafe maneuvers occurred" Pacific Command said, without saying how close the Chinese fighter came to the US plane. One official told CNN that the jet was never closer than 100 feet however. China's Defense Ministry told Reuters "judging by the report, the US side is again deliberately hyping up the issue of the close surveillance of China by US military aircraft."
This is what happens when you strip out volatility and game the system: the system loses all natural resiliency and becomes increasingly brittle and fragile. By making the stock market the only game in town, the Powers That Be can no longer afford to let it decline for any reason.
Betweeen Doha hopes (and nopes), Nigerian supply 'disruptions' which apparently cannot be stopped (conveniently for many oil producers, equity bulls, and central bank inflation watchers), and non-transitory Chinese 'demand', WTI crude has topped $51 this morning - almost doubling off the February lows. While still down YoY, oil prices have recovered to 11-month highs, soothing credit-driven anxiety in markets (even though bankruptcies continue) and enabling hedgers to pile in (crushing the crude curve). With rig counts rising once more (and global GDP being slashed), one questions how sustainable this frothy bounce will be...
"This is an enormous tragedy of huge proportions being played out here before our eyes. Mr. Ackman’s investors did not deserve this fate, but they are being forced to live it nonetheless. How truly sad. He averaged down… again… and again…and again… and again. His eventual demise is a lesson to us all. Would that we learn from it: This is Greek tragedy of the saddest kind. No one deserves this fate"
In an overnight session dominated by the latest political developments out of the US where Hillary Clinton officially claimed the democratic nomination, the financial newsflow focused on China's trade data, where exports fell 4.1% from a year earlier, in line with expectations, but imports dropped 0.4% from a year earlier, the smallest decline since they turned negative in November 2014, driven entire by soaring "imports" from Hong Kong - aka capital outflows - which soared by 243% y/y. The other main news was the official launch of the ECB's corporate bond buying, which helped drive government bonds yields in German to new record lows, and the average yields on investment-grade corporate debt below 1%.
Japan's biggest bank, Bank of Tokyo-Mitsubishi UFJ, is preparing to quit its role as a primary dealer of Japanese government bonds as negative interest rates turn the instruments into larger risks, a fallout from massive monetary easing measures by the Bank of Japan.
The number of international students attending US universities is rising, which is a welcome sight for administrators looking for ways to offset costs and stay profitable. What is not such a welcome sight however, is the amount of cheating that the international students are doing.
"You can't eat, you can't sleep. When you're told your home is now worthless and your biggest investment is now worthless, it's devastating" - This is how Tim Heim, a homeowner in northeastern Connecticut describes the feeling when you're told the concrete foundation of your home is crumbling, and your house is gradually collapsing.