Chillin' out till it needs to be funded
If you have been following the markets long enough, even without prestigious formal education as mine, you can probably see that somehow the first two in the headline do not match with the continuing preponderance of bond investors for the 7th continuous year since that unfortunate weekend in August 2008 and portends there of ever since the US housing markets peaked in 2006 that had since made headlines about a squeamish era of the global economy coming to fruction . FOMC minutes in the middle of the week are likely to show a growing consensus on not accelerating the rate hikes but in that things are normal markets have improved their forecasts of a rate hike to a shorter period.
Since 2008’s event probably because of the extraordinary liquidity used by the world’s dominant reserve currency, the world has been battling lower growth, the US capped at 3% in its best year and Europe at 2% with Brazil struggling with barely 4% growth, China stalling at 7% growth and Russia and Turley battling sharp currency volatility with corruption ridden highs of governance mismanagement holding forth. India on the other hand seems to suggest secular growth is not only possible but de rigueur as long as few investments in infrastructure are made continually from here. India makes a new budget presentation under the Modi government on Wednesday
The US on the other hand despite a contraction of 2.1% oin Q1 still posted our predicted jump in jobs and car sales run rates, with the 288000 number and revisions for the last two months jobs data signifying continuing correction in the US economy with the long term unemployed number even at half its peak will in excess of 5 million such new entrants to the workforce or at least those trying to enter the active workforce again making the gains on the employment population ration almost non existent.
That long term trend is key to understanding why despite a 6 mln rate for Existing home sales and a gushing 500k number in pending home sales, quartlerly growth in the next three quarters is unlikely to be bothered about Q1 or follow any mark beyond a 3% score in growth overall as bond investors stay drawn to 2.5% or as they say now almost non existent yields in US long term bonds. The weekend also heralds the start of a n important bull run in the US Dollar making it unlikelier still that long term bond investors now including China and Norway Sovereign funds again will mark their the US dollar reserves to reduce status again.
GM’s recalls do not seem to otherwise inconvenience its own monthly sales with the midwest continuing at the peak of production bullishness rilled out in 2014 as seen on the Chicago PMI but car sales at their best are unlikely to beat the June mark at 16.9 mln sales a year with Chrysler and Honda and Toyota having recovered their traditional markets again.
There is no data series in this week Monday except the Ameritrade index which will probably come out of a small trough to show up on higher marks the rest of 2014 though gains on the S&P have been limited double digits since January being in record breaking territory almost every other week and investors hungry for better rewards than their bond portfolio
JOLTS data already made a discontinuous jump in April data printed last month and is unlikely to drop back to old trend from nearly 4.5 mln openings given the expected ingress of a lot of the otherwise unemployed into the workforce likely to consolidate at the new unemployment rate low around 5.3%. Similarily , consumer credit data is due tomorrow again unlikely to register any continuing surprise after the coming of spring jumped up auto loans data in last month’s April reading. Consensus estimates however on both indicators have been number down by the snow and are unlikely to be any sacrosanct for currency traders allowing the Dollar to turn back excep tthe weakness in the Euro is likely to deepen midweek with really bad prognostication of the economy coming true in the month end data and follow up consolidated reports from the ECB unlikely to improve sentiment
Banks report their compliance with reserves oin Wednesday and MBA purchase and Jobless claims are likely to continue with spring in their step this week as well, mortgage rates staying bound to long term yields though the news of new sub prime issuance and the breakdown in munis has already hurt some big mortgage bankers like JP Morgan and mid sized banks continue to move faster on available capital in booking first mortgages.
Jamie Dimon will probably have details of his retirement plan when he announces JP Morgan’s Q2 results this week with CFO Marianne Lake. Wells Fargo also reports earnings on Friday while Citi , Goldman Sachs and Morgan Stanley follow next week
Risk taking has been paying off in the Forex market to global growth advocates albeit in the constraints outlined above and I hope you all have a good week and come back to read the tea leaves with us later