Daily Market Color 04/29/2013

Daily Market Color

04/29/2013

Economic Reports &Headlines

The global economic calendar today is full and eventful. We will start with economic reports from the European region and eventually make our way across the Atlantic. The European Union’s measure of business and consumer sentiment came in lower than expected in April, 89 Vs 88.6.

Inflation in Germany declined more than expected in April on a month over month basis, -50bps Vs -10bps.

On the domestic front, Personal income and Outlays for March came in mixed. Personal income on a month over month basis increased less than expected, 40bps Vs 20bps. Consumer spending came in higher than expected, 20bps Vs 10bps.

Pending home sales for March reached its highest level for 2013. The report beat consensus by giving the following reading: 150bps Vs 70bps. Three out of four regions posted gains while the Northeast was flat for the month.

The Dallas Fed survey which measure business activity in the state of Texas. The repots was horrid when compared to consensus, -15.6 Vs 5.

The Fed is expected to continue easing in light of inflation reports that were below consensus and significantly below the Fed’s inflation target.

Market participants are speculating that the European Central Bank will cut its key interest rate due to deteriorating conditions in the region.  

Future Reports

Later on this evening we will get many reports from the island nation of Japan. We will get a read on manufacturing, household spending, employment, industrial production and retail sales.

Tomorrow the FOMC will begin their two day meeting which will lead into a monetary policy announcement on Wednesday.

In the European region, we will get a read on inflation and unemployment tomorrow morning.

On the domestic front, S&P/Case-Shiller 20 city home price index is expected to rise 1.0% on a month over month basis.

In addition to the read on housing prices in the US, we will also get a read on the Chicago PMI and consumer confidence.

Tomorrow evening, the largest nation by its population, China, will issue manufacturing PMI report that is expected to signify a slight expansion.

    

Trades

Last week ended on a rough note. US GDP came in lower than expected. The Bank of Japan backtracked by extended the time period in which they are forecasting to reach a 2% inflation target. Despite the news, I will remain long SP futures and short Japanese Yen futures. This week will prove whether market participants believe that the GDP report and the BOJ announcement will reverse the trend in both markets. Today, we could see that the Yen is falling and US equities are rising. Friday negative reports appear to be disregarded by market players. Since Friday’s reports are out of the way, we will pay attention to the Fed, ECB and US Gov’t employment reports this week.     

Weekly Round-Up: 04/22/13 – 04/26/13:

Weekly Round-Up: 04/22/13 – 04/26/13:

Existing homes sales missed consensus

Chinese Flash manufacturing PMI missed consensus but still expanded

US Flash manufacturing PMI missed consensus but still expanded

New Home sales marginally missed consensus, but was still strong

Richmond Fed Manufacturing Index missed consensus and contracted

Durable Goods Orders missed consensus and declined more than expected

The UK averted a triple recession

Jobless claims beat consensus and came in better than the previous week

Kansas City Fed Manufacturing index contracted more than expected

The Bank of Japan inflation target was extended to three years instead of two

US GDP missed consensus and grew at a slower rate than expected

Consumer sentiment beat consensus and grew larger than the last month’s reading

Earnings season is doing well so far. 75% of SP 500 companies that reported earnings beat expectations on the bottom line (earnings); however, only 45% beat on the top line.  

 

Commentary

The economic picture in the US and the European Region are looking bleak. Most of the economic reports out of the US this week missed consensus. In addition to that, European economic reports were completely horrible. The only thing that held markets up this week were US corporate earnings. Next week the Fed is expected to continue easing. The ECB is expected to cut their key rate. On Friday, the we will get a read on employment in the US.   

Daily Market Color 04/26/2013

Daily Market Color

04/26/2013

Economic Reports &Headlines

GDP in the US missed Econoday’s consensus on a month over month basis, 2.5% Vs 3.1%. Government spending was the worst performing component in the report. Consumer spending was strong.

The University of Michigan Consumer Sentiment report beat consensus, 76.4 Vs 73.0.

Daily Market Color 04/25/2013

Daily Market Color

04/25/2013

Economic Reports &Headlines

UK GDP averted a triple dip and climbed higher than consensus, 30bps Vs 0bps

On the domestic front, Jobless claims in the US came in lower than consensus, 339k Vs 350k

Consumer prices in Japan, the third largest nation by GDP, grew 20bps on a month over month basis in March. However, the consumer price report declined 80bps on a year over year basis.

The Bank of Japan kept monetary policy unchanged. The board went back on their word of achieving 2% inflation in two year by issuing consumer pricing forecasts that indicated the 2% target being reached in three years.

Daily Market Color 04/24/2013

Daily Market Color

04/24/2013

Economic Reports &Headlines

Over in Great Britain, the Bank of England extended their Funding for Lending Scheme (FLS) into 2015. FLS was expected to end in January 2014. It’s designed to make credit available to small and medium sized businesses in the UK.

Germany’s Ifo survey came in lower on all three fronts which are: Economic sentiment, current conditions and business expectations. The figures were lower than March’s reading as well. Despite the report coming in lower than expected, it still was a slightly optimistic reading of the German economy.

Durable Goods Orders in March disappointed by coming in lower than expected, (-5.7%) Vs (-2.8%). This was the worst reading since August of 2012 according to Bloomberg.com.

Boeing, P&G, Ford, Netflix, Apple and Yum beat analysts’ estimates.

Future Reports

Tomorrow’s global economic calendar will most certainly be eventful. At 4:30am New York time, the UK will give a read of first quarter GDP which is expected to increase 30bps year over year and have no change month over month.

On the domestic front, Jobless Claims will be released at 8:30am; economists are expecting claims to come in at 350k.

Over in Japan, the Bank of Japan will make its monetary policy announcement. Market participants are speculating that price forecasting will be used as a deflation tool in the east Asian island nation.

We will get a read on Japanese consumer price data for March. Consensus is calling for 40bps decline year over year.

We will also get a read on manufacturing in Japan with the issuance of the PMI manufacturing report.

Trades

US Stocks are unchanged and so is the Yen. Tomorrow and Friday should prove to be eventful. We have GDP being released from the UK, which I expect to decline and signify triple dip recession. We will hear from the Bank of Japan and we will get a read on inflation in Japan with the consumer price index. On Friday will get a read on the US economy via the issuance of first quarter GDP.  

Daily Market Color 04/23/2013

Daily Market Color

04/23/2013

Economic Reports &Headlines

The global economic calendar today was quite packed. France kicked-off the calendar this morning at 2:45am New York time with their business climate indicator. The report measures sentiment among French business leaders. The report came in lower than expected, 88 Vs 90, for April.

Germany Flash PMI in April contracted and came in lower than expected and lower than last month’s reading on the manufacturing and service front.  

France Flash PMI in April contracted less than expected and less than last month’s reading on the manufacturing and service front.  

The European Union Flash PMI composite in April was virtually in line with consensus and it contracted at that same pace as last month’s reading.

Heading over to the UK, CBI released its industrial trends survey for April, which greatly disappointed market participants, -25 Vs -15. The survey subjects are senior manufacturing executives who give insight to investment intentions, capacity utilization and business confidence.

On the domestic front, Flash Manufacturing PMI expanded less than expected for April, 52 Vs 54.2.     

New Homes Sales in March came in slightly lower than expected, 417k Vs 419k, however this caps the best quarter in the housing industry since 2008 according to Bloomberg.com. Sales increased in the Northeast and the South by 20.6% and 19.4%, respectively. Sales dipped in the West and Midwest by 12.1% and 20.9%, respectively.

BOJ might use price forecast as a tool to combat deflation, according to Bloomberg.com.

Future Reports

Tomorrow over in Germany, Ifo will release its German business sentiment survey at 4:00am New York time.

In addition to that Italy will release retail sales figures at 4:00am New York time as well.

Over in the UK, CBI will release its distributive trades report at 6:00am New York time.

On the domestic front will get a read on Durable Goods Orders in March. Econoday consensus is at -2.8% on a month over month basis.

New Zealand central bank will make its monetary policy announcement this evening at 5:00pm New York time.

At 9:30pm (New York time) tomorrow night, we will get a read on consumer prices in Australia.

Trades

US Stocks are rallying and the Yen resumed its race to the bottom. This is surprising giving the less than stellar Flash PMI report from China. PMI reports from Germany, France and the EU were disappointing as well. However, US stocks are within reach of making up for last week’s decline. This week we have a Bank of Japan announcement to look out for. Although the bank is expected to do nothing, market participants are speculating that Kuroda and his team will utilize price forecasting to further combat deflation. Price forecasting and increasing deflation rhetoric could potentially be the catalyst that pushes the Yen above 100. Japan will release consumer price data this Thursday. This report coupled with the BOJ announcement could possibly influence significant swings in the Yen this week.

US Stocks are on a tear due to good earnings and a buoyant New Home Sales report. However, multiple reports lie ahead that could either derail this week’s rally or amplify it. I will be eyeing Durable Goods Orders, Jobless Claims and GDP.

In addition to the above, the UK pound might be in play if GDP contracts. 

Weekly Round-Up: 04/15/13 – 04/19/13

Weekly Round-Up: 04/15/13 – 04/19/13

In the US:

Chinese GDP disappointed*

Chinese Retails sales disappointed*

Chinese industrial production disappointed*

A letter containing poison was sent to the president

Boston marathon was bombed

Empire state manufacturing disappointed by growing loser than expected

The Housing market Index was lower than expected

Consumer prices were lower than expected

Housing Starts were higher than consensus

Industrial production was higher than expected

Jobless claims disappointed by coming in higher than expected

Philly Fed survey disappointed by missing consensus  

 

Commentary

Disappointing Chinese data along with uncertainty surrounding the enormity of the Boston bombings contributed to the sharp decline in US stocks this week. It appeared as if the nation was under a broader attack due to the combination of poison letters sent to government officials and the Boston bombing. Domestic data disappointed as well.  *Although the weekly round-up focus is concentrated in data from the US, I will move to include international events that dominated headlines and influenced market movements when I deem it appropriate. 

Weekly Round-Up: 04/08/13 – 04/12/13

Weekly Round-Up: 04/08/13 – 04/12/13

In the US:

FOMC minutes were virtually uneventful

The federal deficit for March was significantly smaller than expected

Jobless claims declined more than expected

Import/Export prices were lower than expected

Producer prices were lower than expected

Retail sales missed consensus

Consumer sentiment missed consensus by a considerable margin

Business inventories grew at a slower rate than expected

 

Commentary

The economic calendar was light for the week on the domestic front. And the reports that warranted the most attention such FOMC minutes and jobless claims satisfied the markets, thus prices increased.  

Daily Market Color 04/22/2013

Daily Market Color

04/22/2013

Economic Reports &Headlines

Chicago Fed National Activity Index started the economic reports calendar for Monday’s session. The report disappointed by coming in lower than last month’s reading, -0.23 Vs 0.44. A negative reading indicates growth below trend.

US Existing Homes Sales in March disappointed as well by missing consensus, 4.920m Vs 5.030m. According to the Econoday.com entry, the report is being subdued by a low supply of houses. The increase in existing home prices serves as evidence for a drop in supply.

Kuroda’s Japanese monetary policies were unchallenged at the G20 summit

Fitch downgraded UK credit rating to AA+ from AAA according to Bloomeberg.com.

Government statistics will take into account capital spent on intangible assets in its calculation of GDP.

  

Future Reports

Flash PMI will be released for China at 9:45pm this evening; Bloomberg consensus is 51.4

Between the hours of 3:30am – 4:00am tomorrow, Germany, France and the European Union will release flash PMI composite data.

The UK will release data from their CBI Distributive trends survey at 6:00am

On the domestic front, Markit will release its Flash PMI manufacturing index for April at 8:58am, consensus is at 54.2.

New home sales for March will be released at 10:00am; consensus is calling for 419k new home sales

The Richmond Fed manufacturing index for April is expected to come in at 3 according to Econoday consensus.

The central bank of New Zealand will make its monetary policy announcement at 5:00pm tomorrow.

Trades

So far today both economic reports on the domestic front disappointed. US Existing home sales unexpectedly declined in March and the Chicago Fed National Activity Index disappointed as well. If we look beyond the headline number in the existing home sale report, we could see that the number came in lower than expected and lower than February’s reading due to low supply in the existing housing market. The validity in that notion lies in the increase in prices for existing homes.

The Chicago Fed National Activity index is a report that merits no attention. In addition to that, components of the report conflicts with reports that do merit attention. Stocks are relatively flat for today’s session and deservedly so because they are no reports that warrant any significant move to the downside.

I am still long stocks via SP futures and short Yen via Yen futures.

Daily Market Color 04/19/2013

Daily Market Color

04/19/2013

Economic Reports &Headlines

Japan All industry index grew and came in better than last month’s reading, 60bps Vs (-140bps)

Producer prices in Germany declined more than expected on a monthly basis, (-20bps) VS (-10bps)

Consumer prices in Canada were in line with consensus on a monthly basis by growing 20bps

Future Reports

China will be releasing flash manufacturing PMI figures

The National Association of Realtors will issue existing US home sales

Trades

US stocks fell on the Boston bombings, IMF downward revision on global growth, a disappointing Philly Fed survey, Chinese sub-consensus report readings, lower than expected Home Index figures and the list goes on. Nevertheless, I believe this is a buying opportunity. None of the reports should warrant a reverse in the upward trend. Chinese figures were bad when compared to consensus; however, GDP and retail figures were in the high single digits. Industrial production was in the low double digits. These are still good numbers.

Next week we have a GDP report in the US; that should merit strong attention. The bank of Japan will be meeting next week, which should merit strong attention as well. These reports might erase this week out of our memory.  

Daily Market Color 04/18/2013

Daily Market Color

04/18/2013

Economic Reports &Headlines

Retails sales in the UK fell less than expected on a monthly basis, (-70bps) Vs (-80bps)

On the domestic front, jobless claims in the US came in higher than expected, 352k Vs 347k

The Philly Fed survey disappointed by growing slower than expected, 1.3 Vs 3.3

Daily Market Color 04/17/2013

Daily Market Color

04/17/2013

Economic Reports &Headlines

The Bank of England decided to keep policies unchanged as shown in their minutes.

The labor market report in March came in lower than expected, -7,000 Vs -1,700. The unemployment rate edged up ten basis points to 7.9%

The Bank of Canada left policy unchanged in their announcement this morning.

Germany may get downgraded according to USA today.

IMF cut global growth forecast 20bps to 3.3% for the remainder of this year.

Future Reports

Tomorrow we will get retail sales from the UK.

On the domestic front we will get jobless claims data from the US.

The Philly Fed survey will be released

Trades

Stocks are falling and the yen is rallying. Fundamentally and technically market events appears to be nothing that should change the long term trend.

Daily Market Color 04/16/2013

Daily Market Color

04/16/2013

Economic Reports &Headlines

Inflation in the UK came in lower than expected in March on a month over month basis, 30bps Vs 40bps.

Producer prices in the UK were in line with consensus coming in at 30bps in March.

Consumer prices for the European region came in line with consensus at 120bps, on a month over month basis.

Consumer prices in the US came in lower than consensus and actually declined, -20bps Vs 0bps

Housing starts in the US came in higher than expected, 1.036m Vs .0930m

Industrial production came in higher than expected in March as well on a month over month basis, 40bps Vs 20bps. 

Daily Market Color 04/15/2013

Daily Market Color

04/15/2013

Economic Reports &Headlines

Chinese data is setting the tone for Monday’s session. The nation issued three reports which were all disappointing. First quarter GDP from China grew lower than expected on a year over year basis. 7.7% Vs 8.0%

Chinese industrial production in March disappointed as well by growing at a slower pace than expected on a year over year basis, 8.9% Vs 10.0%

Chinese retail sales in March disappointed by growing at a slower pace than expected on a year over year basis, 12.6% Vs 12.8%.

Heading over to Europe, the region had a surplus in merchandise trade in February. The surplus was higher than the surplus in January, 12.0B Vs 8.7B.

On the domestic front, right over in the tri-state area, the Federal Reserve Bank of New York issued its Empire State Manufacturing Survey which gives a read on manufacturing conditions in New York, northern New Jersey and southern Connecticut. April’s report came in lower than expected but still signified an expansion in the region, 3.05 Vs 7.50. Any reading above zero indicates an expansion.

The National Association of Home Builders issued April’s Housing Market Index, which gives a read on housing market conditions in addition to conditions about the general economy. April’s report came in lower than expected, 42 Vs 45.

According to a report from Reuters, Greece received a clean bill of health from international lenders.

The US and Europe call on Japan to not devalue the Yen, according to an article from Bloomberg.

Future Reports

Tomorrow over in the UK we will get consumer and producer prices.

We will also get consumer prices from the European region, the US and New Zealand as well.

The US will issue a report on housing starts and industrial production tomorrow morning 

Trades

Yen futures are rallying and US stocks are declining on disappointing reports from China. In the US, the New York manufacturing report and the NAHB housing market index disappointed. I am sticking to my positions despite the risk-off sentiment. Fundamentally, things are the same and warrant minimal attention. Growth just came in slower than expected in China; however, growth is still strong. On the domestic front, the empire state manufacturing survey expanded and it is known to be volatile. The report does not trend. The housing market index is one report out of several reports that measures housing activity in the US. This report is one the few housing reports in the US that disappointed. I will continue to be long stocks and short yen. The trade continues.  

Daily Market Color 04/12/2013

Daily Market Color

04/12/2013

Economic Reports &Headlines

We are going to start off in Japan with the Tertiary Index, which is a survey that measures activity in 13 different industries. The reading for March came in better than expected on a month over month basis, 80bps Vs 110bps.

On the European front, Italian consumer prices, for March, grew at a slower than expected rate, 20bps VS 30bps. On a year over year basis, consumer prices grew at a slower than expected rate as well, 160bps VS 170bps.

Industrial production for the European monetary union came in higher than economists’ forecast for February on a month over month basis, 40bps Vs 20bps. However, on a year over year basis, industrial production is declining at an accelerated pace versus the previous report, which was revised, (-3.1%) Vs (-2.4%)

On the domestic front, producer prices in March declined more than economists’ estimates, (-60bps) Vs (-20bps). The decline was mainly attributed to gasoline prices. Producer prices actually grew 20bps when you exclude food and energy.

Retail prices in the US declined 40 basis points on a month over month basis. The decline is broad and spans over virtually all of the components in the report.   

Consumer sentiment came in lower than consensus, 72.3 Vs 79.

Business inventories in February grew slower than expected, 10bps Vs 40bps.

JP Morgan earnings were uneventful

Future Reports

Over the weekend China will release first quarter GDP data. Consensus is calling for a 8% increase. We will also get industrial production and retail sales from China  

On Monday we will get trade figures from the European monetary union.

On the domestic front, we will get a read on housing market conditions from the National Association of Home Builders.

Trades

SP futures are falling and the Yen is rising. Nothing changed fundamentally. I will remain short the Yen and long SP futures.  

Daily Market Color 04/11/2013

Daily Market Color

04/11/2013

Economic Reports &Headlines

Consumer price reports were released in Germany and France. On a monthly basis the reports were essentially flat and in line with economists’ estimates. Germany CPI for March grew 50bps.

France CPI for March grew 80bps.

On the domestic front, Jobless claims fell way lower than expected, 346k Vs 365k.

Obama released a budget that targets wealthy Americans to raise revenue

Future Reports

Tomorrow we will get producer prices and retail sales from the US tomorrow morning.

We will also get consumer sentiment figures and business inventories as well.

Overseas in Europe, we will get a read on industrial production.

Ben Bernanke will be speaking at a community development conference in Washington.  

Daily Market Color 04/10/2013

Daily Market Color

04/10/2013

Economic Reports &Headlines

Today we got industrial production from France and Italy. France industrial production came in higher than expected, 70bps Vs 50bps.

Italy industrial production decline more than economists’ forecast, -80bps Vs -50bps.

On the domestic front, the Federal Open Market Committee released minutes from their most recent meeting, March 19-20. The minutes were released early because it was leaked. The minutes showed an internal debate among committee members regarding QE purchases. Some members want QE to only include purchases of treasury securities. Overall the FOMC is dovish and in favor of QE.

Japanese producer prices rose lower than expected on a monthly basis, 10bps Vs 20bps.

Japanese machine orders grew slightly lower than expected in February, 7.5% Vs 8.1%

Australia’s labor force survey for March gave a poor reading. The jobless rate rose to 5.6% from 5.4% last month. The economy shed 36,200 jobs in March. 

Daily Market Color 04/09/2013

Daily Market Color

04/09/2013

Economic Reports &Headlines

Merchandise trade was released for China, Germany, France and Great Britain. China trade report surprised everyone with a deficit when consensus was calling for a surplus, (-880m) Vs 15bn.

Germany trade surplus came in higher than consensus, 17.1bn Vs 15.0bn.

France trade deficit was larger than expected, (-6bn) Vs (-5bn)

Great Britain trade deficit was larger than expected, (-9.4bn) Vs (-8.7bn)

Industrial production in the UK came in higher than expected, 100bps Vs 40bps.

Daily Market Color 04/08/2013

Daily Market Color

04/08/2013

Economic Reports &Headlines

Industrial production in Germany came in higher than expected on a monthly basis, 50bps Vs 30bps. On a year over year basis industrial production in Germany fell less than forecast, -1.8% Vs 2.6%

2.6%

Future Reports

Tomorrow will be a busy day on the economic front. But before we delve into the details of tomorrow, tonight we will see a few reports that merit attention. The Bank of Japan will release minutes from a meeting they had 4-5 weeks ago.

We will get a read on inflation from the world’s second largest economy, China. Consumer prices and producer prices will be released.

Tomorrow we will get trade data from China, Germany, France and Great Britain.

Great Britain will also release industrial production data. Economists’ are forecasting a 40bps rise on a month over month basis.

Just north of the US, Canada will release housing start data.

The economic calendar will be light for the US tomorrow; however, this evening earnings season will kick-off with Alcoa.

  

 

Trades

US stocks are slightly lower for today’s session. It appears that market participants are refraining from making any trades ahead of Alcoa’s earnings release, which will be issued at the close. Aloca’s earnings are  likely to determine market sentiment for the remainder of the week. The economic calendar is light for the rest of the week too. So US stocks should be at the mercy of market headlines this week.

Over in Japan, the Yen continues to decline and the Nikkei continues to rise. I believe the Yen will continue to drop until the next BoJ meeting. Kuroda pushed his policies through with ease now we have to wait and see if these policies could effectively boost inflation. I have questions regarding the trade. How many negative or flat CPI reports will markets tolerate before they reverse the trend? Would negative and flat CPI readings amplify the trend that’s already in place? What else would the BoJ do to revive the Japanese economy? Regardless of the answers being absent, the Yen is approaching 100. This is a physiological level that should prompt a lot of traders to cover and buy. The level could also be seen as a level to further devalue the Yen at an accelerated pace. If the Yen continues at its current pace, we’ll see 100 before this week is over.

Sterling is rallying. I might cut the trade this week. The service PMI report is prompting traders to speculate on GDP growth this quarter.

Weekly Round-Up: 04/01/13 – 04/05/13

Weekly Round-Up: 04/01/13 – 04/05/13

In the US:

• PMI manufacturing expanded slightly more than expected
• ISM manufacturing expanded less than expected
• Constructing spending was better than expected on a monthly and yearly basis
• Motor vehicles sales were in line with consensus and were essentially flat versus last month
• Factory orders came in slightly higher than expected
• ADP employment missed by a wide margin
• ISM-services expanded lower than expected
• Jobless claims disappointed and came in significantly higher than expected
• The non-farm payrolls reports came in way lower than anyone expected
• And the international trade deficit was slightly lower than expected

  

Commentary

Essentially the disappointing ISM report and the horrendous jobs report brought this rally into question. The lower close for the week was warranted. The start of earnings season next week will be the next catalysts for US equities.  

Daily Market Color 04/05/2013

Daily Market Color

04/05/2013

Economic Reports &Headlines

Great Britain started off the economic calendar for Friday by releasing March’s Halifax Home Price Index. Home prices in the nation increased less than forecasted on both a monthly and yearly basis. Monthly: 20bps Vs 50bps, Yearly: 110bps Vs 190bps.

EU retail sales for February contracted less than economists expected, -30bps Vs -40bps

The non-farm payrolls gave a very disappointing reading, 88k Vs 193k.

Future Reports

Monday will be a relatively light day for economic reports. Germany will be releasing industrial production.

There’s nothing that merit attention on the domestic front.

Over in Japan, we will get more details surrounding the BoJ meeting held 4-5 weeks ago. The overly-active central bank will be releasing their meeting minutes.

  

Trades

SP futures have been falling and British pound futures have been rising. The bad jobs report pushed US stocks down over 1% during the intraday session on Friday; however stocks closed off of the session lows with SP futures only losing 43bps. The ISM services report in Britain was upbeat and this caused the pound to rally. The Bank of Japan governor, Kuroda, shocked everyone by pushing through unprecedented monetary policies with incredible ease. Only 1 out of 9 board members dissented from being excessively dovish.  

The US jobs report is alarming and it makes me question whether the SP trade is still a good trade. Will market players begin to fulfill the correction-prophecy that financial pundits and CNBC guest commentators were preaching about for the past few weeks? Next week is light in terms of economic reports. There is hardly anything on the calendar that merits attention. We have FOMC minutes, PPI, weekly jobless claims and retail sales. What moved the markets, on the economic front, were manufacturing reports, upbeat housing data, jobs, market appeasing federal & central banking policy and buoyant service sector data. When you put the jobless claims reports aside, there are no reports that warrant market-moving attention. Nevertheless, earnings season will kick-off next week with Aluminum producer Alcoa. Earning reports could be the only factor that would offer bulls the fuel to beat out the bears next week. The poor jobs report was a significant blow to the rally, however, the trading session did finished off of its lows by a wide margin. I could only guess that market players are expecting for the next non-farm payrolls report to include an upward revision. They probably don’t want to get short ahead of earnings season and lose out on surprises to the upside from corporations. Maybe they want to judge this economy by housing and manufacturing instead of making a bearish call on one lousy NFP report. I will remain long but I think a few more down days coupled with a poor start to earnings season could indicate the end to this rally momentarily.  

Moving over to Britain, sterling has been rallying in light of a better than expected read on their service sector. It is difficult to remain short as the trade rally against me, but I don’t see a technical set up or a fundamental setup that would have prompted me to sell last week. But it feels like that technical set up that would motivate me to cover my short position may come next week. It has been a while since the pound went below 1.50. It has been trading in a range for the past month. Maybe I should add a time stop on trades as well. On the fundamental side, manufacturing in the country is contracting and it contracted more than consensus on multiple occasions. The service sector remained strong and inflation remains above the Bank of England’s target. GDP declined last quarter and I am banking on a lower pound in light of their deteriorating economy. More specifically, I would need Fitch to issue a downgrade by the end of this month and I would also need GDP and manufacturing to contract further in order for the pound to decline further against the dollar. Industrial production in the country will be issued next week. That should be the next report to move the pound lower if the report disappoints. 

Daily Market Color 04/04/2013

Daily Market Color

04/04/2013

Economic Reports &Headlines

Germany’s PMI composite expanded less than expected. French & EMU PMI contracted more than expected.

UK services PMI expanded more than expected.

BoJ double their asset purchases and removed a cap on the bond durations.

ECB and the BoE left rates unchanged.

Jobless claims came in higher than expected, 385k Vs 350k.

Daily Market Color 04/03/2013

Daily Market Color

04/03/2013

Economic Reports &Headlines

Today is a light day for economic reports, however, the few reports that we do have are bound to move markets. Let’s start off in Europe. The European Union GDP quarterly growth decline less than expected in the fourth quarter, -60bps Vs -90bps. The numbers were the same on a year over year basis as well.

European Union harmonized index of consumer prices were in line with consensus for March coming in at 1.7%. February’s inflation rate was ten basis points higher at 1.8%.

The ADP employment report for March was disappointing since it came roughly 25% lower than consensus, 158k Vs 205k.

The non-manufacturing ISM index indicated that the service sector in the US expanded less than expected for March, 54.4 Vs 56.0.

Future Reports

Tonight the Bank of Japan will issue their monetary policy decision.

We will get PMI composite data from France, Germany and the EU. France and the EU are expected to give sub-50 readings, which indicate contraction. The markets are expecting Germany to give a PMI reading slightly above 50.

Great Britain will be releasing PMI data for their service sector.

The Bank of England and the European Central Bank will issue monetary policy decisions. Both banks are expected to leave their key rates unchanged.   

Trades

Tonight I would look forward to reading the details of the Bank of Japan monetary policy decision. I will also look at the market reaction. SP futures are down and the pound is up. Today was a loss for the US in terms of economic reports. The ADP employment report grew less than expected. The services ISM data expanded at a slower pace than expected pace as well. I will remain long SP futures and short British Pound futures. Nothing changed. Tomorrow we will get a read on the service sector in the UK. Any disappointment should push the pound lower.