Monday morning bullet points

*  While the employment report was generally poor (including a horror show household figure that was the worst since December 2009, excluding the government shutdown), there was still a nugget of light or two.  Macro Man was particularly interested to see another uptick in manufacturing wage growth, which has now pushed above 3% y/y.   Readers are invited to speculate for themselves what this might imply for corporate profits and/or inflation.



*  The news was not particularly rosy in China, either.  Although the trade surplus was some $5 bio higher than expected in April, it was driven largely by much weaker than expected imports, which dropped nearly 11% y/y.  Given that steel rebar and iron ore prices have shown signs of topping recently, the recent weakness in the commodity complex could well just be a case of 'reality bites".


* One exception, of course, may be oil.   Not only has the inferno in Canada knocked out a considerable portion of the oil sands production, perhaps for some time, but many readers will have seen that Saudi Arabia has replaced its oil minister.  Although most reports suggest that new minister Khaled-el-Falih will continue the Kingdom's strategy of the past year or two, change nevertheless brings uncertainty...and in any event, any change in policy could hardly be more bearish oil, could it?   Anyhow, oil vs copper on a beta-adjusted basis is starting to look quite perky, and could be an interesting way of fading the China commodity orgy while capturing the improved supply/demand dynamic in crude...


* Score one for the neo-Fisherians.   The head of Maersk, the world's largest shipping company, has granted an interview with Bloomberg where he blames easy monetary conditions for preventing necessary consolidation in the industry, thus depressing prices.  One would assume the various members of the PhD community within policy-making circles would simply suggest that he is using the wrong model.  Needless to say, it's easy to see where his views come from:

  Macro Man can envisage a discussion between the two sides unfolding something like this:



* Finally, if you have the sorts of debates with your kids that Macro Man does- namely, that music back in the good old days was much better than the over-produced rubbish favoured by today's yoof- then this is an invaluable resource in proving your point.   Actually, even if you don't have these arguments, it's fun to spend a few minutes and see how popular music has evolved over the past sixty years or so.  (H/T @AlenMattich.)
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EuropeanBull
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May 9, 2016 at 7:30 AM ×

a little detail:
Maersk is not in the business of bulk shipping so the Baltic Dry index is the wrong Price here.

The picture does not become prettier if you look at the Shanghai containerized freight index (also in Bloomberg) - it actually lacks the recent rally in bulk prices.

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Rossco
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May 9, 2016 at 8:40 AM ×

The most useful question I think we can all ask ourselves is "wheres the next pain trade?"

Sitting with the smallest gross exposures I have ever had and waiting for the market to be caught offside has been my only real mechanism for not losing money this year. Sadly, I don't see that changing

Short $ looks like the trade to be late to this month and the opposite to that is long commodities.

Recently I have felt like a 20 something accountant at a party full of singles.

"So, what is it you do ?" ahh, ummm.


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Polemic
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May 9, 2016 at 9:05 AM ×

I may be a bit late to the China bear club, having decided to attend other parties before the China one warms up, but the weekend data re imports and more importantly the articles in the China Daily about lleverage being te greatest sin, has me thinking the main act is about to arrive on the main act is about to come on stage.

Iron down 7%, copper down huge again ( yes yes I 'm stopped out again in the S+M club of long copper) is hardly compensated by an historic (March) German manufacturing number. So, throw those into a market that saw a US FEd influence global bounce on Friday and I think we could fall over again. But of course , as others here have been saying, THis is not the easiest market to decide on medium term positions.

China is the San Andreas fault trade. You know it's overdue a shake down, but people still move there.

Daily sniping appears to be more profitable than 6+ month views which just end up being bimodal as to comment board input.

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Bruce in Tennessee
admin
May 9, 2016 at 1:02 PM ×

Well, I would like to thank those of you who post with a name. Whether I agree with what you post, the only way to be more informed is to read something that someone else has experienced or thinks. The nattering nabobs of anonism don't blow my skirt up very high at any time.

I am always smarter than the room, but sometimes I seem to have to pay for the privilege. Try to keep me grounded, boys....

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Bruce in Tennessee
admin
May 9, 2016 at 1:17 PM ×

https://assets.bwbx.io/images/if0tytKMu1qo/v2/-1x-1.png

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washedup
admin
May 9, 2016 at 1:57 PM ×

@MM Curse you for appropriating a full hour of my life through the 'music from the ages' link.

@Pol -"China is the San Andreas fault trade. You know it's overdue a shake down, but people still move there."

Quite a gem - wish I had come up with that.

I definitely feel China is slowly making its way back to the worry list, but not yet in a sky is falling kind of way - Don't know if this is the time to short, but I would definitely be nervous if I am long or bullish that general theme.

As for the oil rally because of the fire, for the millionth time guys, focus on the backs - MM you may find the same plot a bit different if you did it vs Cal 20 or Cal 22 for the two.

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Anonymous
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May 9, 2016 at 4:24 PM ×

Taiwan's exports to post a year-on-year decline in April for the 15 consecutive month.

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Anonymous
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May 9, 2016 at 4:27 PM ×

Russell 2000 PE was 81 a year ago , today its 425...

http://www.wsj.com/mdc/public/page/2_3021-peyield.html

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abee crombie
admin
May 9, 2016 at 4:59 PM ×

China FX reserves up again for the second month, though smaller than the CA surplus so still some capital leaving but apparently they have clamped down on the easier ways to siphon money out of the country (over invoicing ?)

Darn EM FX taking it a bit on the chin today though most of the moves seemed to happen at 8am with oil (not sure what the news was, anyone care to share?)

Taiwan exports actually did better than the month before, which is not the case for SKorea or Singapore.

GDX holding up pretty well given the price action in gold.

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abee crombie
admin
May 9, 2016 at 5:04 PM ×

oh and on REITs, remember they are to become a GICS independent sector, with inflows ranging from 5-100B (so really no consensus) of inflows at the end of August.

If there is one thing financial markets are good at, its front running

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Anonymous
admin
May 9, 2016 at 5:24 PM ×

i generally get the feeling that bears want to be short but are hesitant ...most people defensive in their mind but not positioned for a leg down..

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Leftback
admin
May 9, 2016 at 5:31 PM ×

Of note today, USDJPY a lot higher, Spoos not tracking. That rather exotic correlation is history, apparently.

"Oil up on fire in Canada" drove me nuts last week, but a return of cooler weather to the Great White North is hosing down the oil specs today. We are short USO.

The Monday morning commodity slaughter also took down gold and GDX. We remain long DX and short CADUSD.

A bump in Spoos into OpEx at the end of next week? Seems likely. We are neither long nor short, but we are running a small short at the long end of the curve through the Tsy auctions and into Friday's retail sales number.

Hammock Time, basically.

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johno
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May 9, 2016 at 6:44 PM ×

Re the appointment of Khaled El-Fatih, it may indeed be an incremental negative. According to press reports, Al-Naimi was working towards a production freeze at Doha, but got over-ruled by the prince because the deal didn't include Iran. El-Fatih is thought to be under-the-thumb of the prince, so chances of a deal in the next months are probably down. I'm hardly the oil markets expert though ...

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Leftback
admin
May 9, 2016 at 8:05 PM ×

Some FX commentary, notably to the extent that AUD and CAD have clearly topped and rolled over. Also the DX rose last week in the face of a weak jobs number. Price is talking whenever an asset price rises on bad data or falls on good data etc... :

http://www.marctomarket.com/2016/05/dollar-drivers-in-week-ahead.html#!/2016/05/dollar-drivers-in-week-ahead.html

Not much data this week, retail sales on Friday the most important.

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Anonymous
admin
May 9, 2016 at 9:49 PM ×

Offshore Leaks Database
Find out who’s behind almost 320,000 offshore companies and trusts from the Panama Papers and the Offshore Leaks investigations

https://offshoreleaks.icij.org/

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Anonymous
admin
May 9, 2016 at 9:51 PM ×

When you are in debt that you cannot ever pay, just take on more debt

BBG:Puerto Rico Seeking to Sell Water Bonds

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