If, in the New Normal, newsflow and facts mattered, facts such as the German Zew Investor Expectations index crashing from 43.2 to 33.1, smashing expectations of a 40.0 print to the downside and down to the lowest since January 2013 nearly half the 7 year half reported as recently as December confirming Germany can no longer be Europe’s growth dynamo courtesy of a still nosebleed high EURUSD, or facts such as overnight Chinese data missed in every category with industrial output up 8.7% y/y in April vs an estimated 8.9%, retail sales up 11.9% below the estimated 12.2% rise and ; Jan.-April fixed-asset investment growing 17.3% vs est. 17.7%, then futures may just posted a downtick. However, since it is a Tuesday, with a ~$1 billion POMO, one can ignore the fundamentals and proceed straight to buying anything and everything with indiscriminate abandon. The only question is whether the NY Fed orders Citadel to slam the VIX under 11 to start off the morning S&P rampage which should push the broad market index above Goldman’s 1900 price target for the end of the 2014.
Taking at look at some other headlines, Reuters is reporting that the ECB has made some small concessions to European banks to allow them to meet deadlines so that the central bank can complete its bank review by October. The concessions have reportedly resulted in a data reduction from around 300 spreadsheet cells per loan to a “significantly reduced amount†according to the article. Reuters is also reporting that although there are signs that the Japanese economy has weathered through the initial impact of the sales tax hike relatively well, weak exports could be the catalyst to spur the BoJ into further action in coming months. The article says at the moment, exports remain the biggest risk to the central bank’s outlook.
Turning to the day ahead, it’s likely that most of the attention will be centred on US April retail sales as well as their revisions. The Fed’s Lacker will be speaking today on the credit markets.
Bulletin Overnight Summary:
- Source comments pointing to Buba being more open to ECB easing in June weighed heavily on EUR and prompted further flattening of the Euribor curve, with stocks (Eurostoxx 50, +0.11%) also rallying on prospect of more policy easing
- Looking ahead for the session the US retail sales report, coupled with Fed’s Lacker, look to be the market moving events participants will get to digest
- Treasuries gain, led by 10Y-30Y sector, as German investor confidence fell for a fifth month in May, rebels in Ukraine seek to secede; retail sales due at 8:30am.
- China’s economic slowdown deepened with unexpected decelerations in industrial-output and investment growth and a decline in home sales, testing policy makers’ reluctance to step up monetary stimulus
- Chinese central bank told officials from 15 banks yesterday that they should approve and distribute qualified home mortgages in timely manner, according to a statement on its websiteÂ
- ZEW’s index of investor and analyst expectations fell to 33.1 in May from 43.2, lowest level since Jan 2013; ZEW said there are signs Germany will not retain fast pace of growth
- The Bundesbank is willing to back an array of ECB stimulus measures, including negative deposit rate, cut in lending rate, some ABS purchases; remains resistant to large-scale purchases of public and private debt, WSJ reported, citing person familiar with the matter
- Russia called disputed referendums in eastern Ukraine a sign of “deep crisis†in its neighbor as rebels there sought to secede and gas export monopoly OAO Gazprom gave Kiev a deadline to pay or risk being cut off
- Facing a military assault by Ukrainian government troops, the self-styled Donetsk People’s Republic on the border with Russia declared itself a sovereign state yesterday
- Obama is missing something in this election season: a corporate bad boy to rail against and whip up the ire of Democratic voters, with oil companies, Wall Street executives and even PACs off-limits because of unique political dynamics in the 2014 midterms
- Sovereign yields mixed. Nikkei +1.95%, Shanghai -0.1%. European equity markets mixed, U.S. stock futures rise. WTI crude higher, gold and copper lower
