Perhaps the most important “news” of the day is that it is non-Tuesday.
Yes, there was actual news news, like German factory orders dropping -2.8% on expectations of a 0.3% increase, French industrial production down -0.7% on expectations of a 0.3% increase (both misses driven by a soaring Euro which is now spitting distance away from the 1.40 ECB “redline”), the Nikkei tumbling 2.9% to just above 14000, the Shanghai Composite down 0.9%, SocGen Q1 profit plunging 13% and conveniently blaming it on Russia, speaking of Russia things continue to deteriorate even though Interfax reported that the country has received the first part, some $3.2 billion, of the promised IMF bailout – money which will be used to promptly pay Gazprom… and buy gold, a sudden conflict between China and Vietnam escalating over the placement of an offshore oil rig and so forth, but in the new normal, none of this matters.
If there is anything that does matter it will be that the central-planning Chairmanwoman of the “free” world, Janet Yellen will speak before the Joint Economic Committee of Congress at 10am. Algos are surely hoping that she reveals a USDJPY target, and thus S&P 500, EOD target at least 1% above the overnight lows. She better, because with the ongoing demolition of high beta stocks like TWTR and WFM, Alibaba’s “largest ever tech IPO” may be Virtu’ed quite soon unless the Fed brings some spring momentum ignition step back to the “high freak” trading vacuum tubes. She better: adding complexity to the “trading” day is that there is no POMO today to spark an indiscriminate buying rampage.
Looking back at yesterday’s performance, the S&P500 (-0.90%) fell for the third time in four days this month, with two notable sector underperformers in tech (-1.18%) and banks (-1.5%). The big underperformer was Twitter which fell 17.8% as the company’s insider share lockup expired yesterday. Twitter’s market cap fell to around US$19bn, which is incidentally roughly the same amount that Facebook paid for its Whatsapp acquisition earlier this year. Twitter dragged down other social media stocks including Facebook (-4.4%) and internet stocks in general such as Google (-2.4%) and Amazon (-4.1%).
There wasn’t a single bank in the S&P500 (and only a handful in the Stoxx600) which finished in the black. Barclays set a negative tone for financials at the start of the day when it surprised the market with a 41% drop in Q1 FICC trading revenues. Markets are expecting a significant change in strategy at the bank’s upcoming Strategy Day to be held tomorrow. Softer fixed income trading revenues certainly is a reccuring theme, coming after a number of global broker-dealers reported soft FICC revenues in Q1 and JPMorgan’s trading warning last Friday warning of weak FICC revenues for the current quarter. Low volatility, the Fed’s gradual taper and subdued volumes are all being blamed for the reduction in global FICC revenues. JPMorgan’s CEO also warned yesterday that companies such as Google and Facebook may eventually compete with banks in the global payments industry.
Turning to the day ahead, today’s tone will be largely dictated by the Fed Chair’s JEC testimony. We may get her prepared remarks shortly before the testimony begins at London 3pm. The European data flow includes German factory orders (+0.3% MoM expected) and industrial production numbers in France. Consumer credit is the major data release in the US.
Bulletin highlights from Bloomberg and RanSquawk
- Asian equities closed lower (Nikkei 225, -2.93%) as the sentiment following a lower close on Wall Street, led by tech & social media stocks, carried over, which was further augmented by the release of weaker than expected Chinese HSBC Services PMI (Apr) M/M 51.4 (Prev. 51.9), employment is at a 7-month low
- Cautious price action observed over in Europe, with stocks (Eurostoxx 50, -0.23%) seen lower across the board, amid weak earnings, tensions surrounding Ukraine and looming risk events (ECB policy decision on Thursday)
- Markets now await Fed’s Yellen who speaks on monetary policy and economy at 1500BST, the JPMorgan Global PMIs and a 10yr note auction, as well as earnings from Tesla and Allergan
- Treasuries gain, 10Y yield holding near YTD lows before $24b auction of the debt; focus on Yellen’s testimony before Congress this morning as Ukraine continues offensive against separatists.
- 10Y notes to be sold today yield 2.61% in WI trading after drawing 2.72% in April; stopout at that level would be lowest since June
- Land sales in 20 major Chinese cities fell 5% in March from a year earlier, the biggest drop in at least a year, according to China Real Estate Information Corp. data compiled by Bloomberg
- The value of land sales in third-tier cities declined 27% last month, according to SouFun Holdings Ltd., the nation’s biggest real-estate website owner
- German factory orders fell 2.8% in March; economists forecast a gain of 0.3%, according to the median of 37 estimates in a Bloomberg News survey
- The parts of Ukraine where separatists and loyalists face off in ever-more violent clashes are home to the most valuable assets of the nation’s defense industry, with more than 50 factories forming an arms cluster that caters to Russia
- David Einhorn said he found a recent dinner conversation Bernanke scary: “I got to ask him all these questions†and “it was sort of frightening because the answers were not better than I thought they would beâ€
- Higher fees that have helped replenish the FHA’s coffers have also prevented hundreds of thousands of first-time purchasers from getting FHA loans, according to the National Association of Realtors
- Richard Hornsby, COO of FHFA, is facing a felony charge for threatening to kill Ed DeMarco, the agency’s former top official, according to Washington, D.C. police and Superior Court records.
- U.S.-backed leaders in the Syrian opposition have come to Washington to lobby for better arms, challenging the Obama administration’s position that providing advanced anti-tank and anti-aircraft missiles is too risky
- Thai Prime Minister Yingluck Shinawatra was removed from office by the Constitutional Court, raising the risk of fresh protests in the capital after months of unrest
- Sovereign yields higher. Asian stocks slide, with Nikkei falling 3%, Shanghai -0.9%. European equity markets, U.S. stock futures fall. WTI crude and gold higher, copper falls
