16Apr2015 Market Update: Markets Lower, Corporate Earnings In Investors Minds, Oil Trending Down, U.S. Dollar Remains Down

Here is the current market situation from CNN Money

North and South American markets are lower today with shares in Brazil off the most. The Bovespa is down 0.62% while U.S.’s S&P 500 is off 0.26% and Mexico’s IPC is lower by 0.19%.

Wall St. Edges Down, With Company Earnings in the Spotlight

Citigroup and Netflix reported results that pleased investors.

The Changing World Of Work 4: The “Signal” Value Of Credentials Is Eroding

Submitted by Charles Hugh-Smith of OfTwoMinds blog, (Part 1, Part 2, and Part 3 here)

An entire new feedback loop of accreditation is needed, and fortunately that feedback is within our control: it’s a process I call accredit yourself.

Economist Michael Spence developed the job market signaling model of valuing employees based on their credentials in the 1970s. The basic idea is that signaling overcomes the inherent asymmetry of information between employer and potential employee, i.e. what skills the employer needs and what skills the employee actually has is a mystery to the other party.

Credentials (diplomas, certificates, grad point averages, test scores, etc.) send a signal that transfers information to the employer about the opportunity cost the potential employee sacrificed for the credential.

It is important to note that the credential doesn’t necessarily signal the employee’s actual skills or knowledge– it only signals the amount of human and financial capital the employee and his family invested in obtaining the credential.
Signaling boils down to something like this: if Potential Employee A graduated from a prestigious Ivy League university, and Potential Employee B graduated from a lower-ranked state univer …

Citi posts highest quarterly profit in eight years as costs plunge

(Reuters) – Citigroup Inc reported its highest quarterly profit in nearly eight years as costs plunged, showing that the bank’s efforts to streamline its business are beginning to pay off.

Wall St. falls as investors eye earnings

(Reuters) – U.S. stocks opened down as investors continued to digest earnings that were largely ahead of expectations but showed little organic growth.

Rail Week Ending 11 April 2015: Continued Weakness In Rail Data

Econintersect: Week 14 of 2015 shows same week total rail traffic (from same week one year ago) again declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic, which accounts for half of movements, is growing year-over-year – but weekly railcar counts remain in contraction. Rail traffic remains surprisingly weak.

Read more …

Cost-Cutting Helps Citigroup Beat Estimates

The bank swung to a profit in the first quarter, benefiting from lower expenses and strong investment banking results.

Goldman Sachs Reports Robust Earnings as Trading Revives

Much of the investment bank’s higher revenue was contributed by the trading desks that have struggled the most in recent years.

For Greece All Bets Are (Literally) Off: Bookie Closes Grexit Market

You know it’s over when the bookies are closing their markets.

From bookmaker William Hill…

* * *

No More Bets On Grexit

Bookmakers William Hill have closed their markets on whether Greece will leave the Eurozone during 2015 and on which country would be first to leave the Eurozone.

‘Greece had been heavily backed down ro 1/5 to be the first to quit the Eurozone, and we’d also been shortening the odds for Greece to leave during 2015. They’d come down from 5/1 to 3/1.’ said William Hill spokesman Graham Sharpe, ‘It is now looking increasingly likely that they could begin the process of departing very shortly’

‘No one is interested in backing Greece to stay in the Eurozone until the end of the year, so we decided to pull the plug on the markets until either the decision to leave is taken, or the crisis point passes and a plan is put in place enabling the country to remain in’ added Sharpe.

* * *

As a reminder, Thursday morning, reports indicated that Athens has appealed to the IMF for a reshuffling of its debt repayment schedule so that the government can pay pensions and public sector wages while attempting to negotiate a deal with creditors — Tsipras was rebuffed. Which reminded us…

U.S. housing starts data underperforms; jobless claims rise

WASHINGTON (Reuters) – U.S. housing starts rose far less than expected in March and permits recorded their biggest drop since last May, which could raise concerns about the economy’s ability to bounce back from a soft patch hit in the first quarter.

11 April 2015 Initial Unemployment Claims Rolling Averages Little Changed

Blue Line 4 Week Average

The market was expecting the weekly initial unemployment claims at 275,000 to 290,000 (consensus 280,000) vs the 294,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 285,500 (reported last week as 282,250) to 282,750. The rolling averages have been equal to or under 300,000 for most of the last 6 months.

Saudi Oil Production Hits All Time High, Surges By ‘Half A Bakken’

As hopeful US investors buy everything oil-related on the back of a lower than expected crude build this week (after the biggest build in 30 years the week before), The Kingdom has stepped up overnight and ruined the dream of supply-restrained price recovery as it announced a surge in production output in March to yet another record high. The nation boosted crude output by 658,800 barrels a day in March to an average of 10.294 million a day, which as Bloomberg notes, is about half the daily production from the Bakken formation. WTI Crude prices have slipped by around 2% from yesterday’s NYMEX Close ramp highs as it appears Saudi Arabia is not willing to just let this effort to squeeze Shale stall.

Saudi Arabia output surged and hit a new all time high.

And so Crude is sliding… for now.

The Saudis did suggest demand would rise (but again would be offset by increased production):

“Higher global refinery runs, driven by increased seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,” OPEC’s Vienna-based research department said. “Given expectations for lower U.S …

Residential Building Sector Soft in March 2015. This Sector Remains Weak.

Written by Steven Hansen

Residential building data remains soft. The rolling averages are the best metric to view this series – and the rolling averages are decelerating. This data was below expectations.

Housing Starts And Permits Miss Badly As “Warm Weather” Rebound Fails To Materialize

Overnight, when previewing today’s housing starts number, SocGen forecast that “housing starts to rebound; On the data front, housing starts in March should increase by 17% mom, reversing the steep drop in February.”

Bank of America added:

We look for housing starts to rebound sharply to 1.035 million in March after the disappointing drop in February. The decline in February was concentrated in the Northeast which witnessed a 57% decline in the month. This seems extreme and likely a function of poor weather conditions, which should support a recovery with the start of spring. Moreover, building permits are running at 1.102 million in February, suggesting starts should rebound to be more in line with the pace of permits. Much of the gain in permits has been in multifamily, which will likely show through in the starts figures in March. However, we also expect an improvement in single family starts, consistent with the strong gain in new home sales in February and low inventory levels.

Oops.

Moments ago the Department of Commerce reported March starts and permits data, which after the February collapse was expected by everyone to rebound strongly because, well, it didn’t snow as much in March as it did in February. Apparently it did, because not only did Housing Starts miss massively, and just as bad as in February, printing at 926K, on expectations of a 1.040MM rebound from last month’s revised 908K, but permits also missed and in fact decli …

Initial Jobless Claims Miss By Most In 2 Months, Continuing Claims Collapse To Lowest Since Dec 2000

After last week’s plunge to cycle lows, initial jobless claims jumped 12k from a revised 282k to 294k, back above the average for the year. The trend of falling claims has now ended as it appears the end of government fiscal year and QE3 signalled the end of the claims collapse. Continuing Claims, however, plunged to it new cycle lows – now the lowest since Dec 2000.

Initial Claims bounced back to stagnant for the year…

As Continuing Claims hits new 15 year lows…

Charts: Bloomberg

U.S. And Global Property Bubble Fears Mount

U.S. And Global Property Bubble Fears Mount

– “Renewed global property bubble” warned of by Financial Times
– Research company MSCI says returns on property last year averaged 9.9% globally
– “Best performance” since 2007 and fifth consecutive annual rise
– Rents have not increased in line with asset appreciation
– Speculators moving into more risky peripheral markets around the major hubs like London
– Demand being driven by lack of yield and ultra loose monetary policies
– Bubble is now fully dependent on record low interest rates in the U.S. and EU continuing …
– Bubble will burst as all bubbles do … question is not if but when …

Fears of a renewed global property bubble are rising as prices hit records last seen before the financial crisis.

New data shows real-estate returns in the UK surging 17.9% in 2014 and London returns of over 20% and global returns averaging 9.9%, the Financial Times has warned of a “renewed global property bubble”.

Greek Bonds Tumble On News IMF Rejected “Unofficial” Greek Request To Delay Payment

On Wednesday, reports out of Germany indicated that Berlin was drawing up plans to keep the Greek banking sector from crumbling in the event Athens missed one or more of its upcoming payments to the IMF (i.e. in case Greece defaults). Yesterday evening, we went on to highlight a UBS note which cautioned investors not to use bond yields as a proxy for contagion risk because monetary policy has served to strip sovereign spreads of any meaning when it comes to price discovery and conveying risk to investors. It’s bank runs triggered by depositors’ conception of redenomination risk that are the real fear and a Greek exit could well cause periphery depositors to “take it to the mattresses” so to speak.

Today, we learn that earlier this month (so around the time Athens was busy denying reports of an imminent default), Greek officials floated the idea of delaying payments to the IMF due shortly after the government runs completely out of cash at the end of April. Here’s more via FT:

Greek officials have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, highlighting the parlous state of Greek finances, but were told that no rescheduling was possible.

According to officials briefed on the talks by both sides, Athens was persuaded not to …

Goldman profit gets boost from increased trading

(Reuters) – Goldman Sachs Group Inc reported a first-quarter profit on Thursday that handily beat analysts’ expectations, driven by a burst of trading in fixed-income and currencies.

Euro zone yields sink to new lows, Greece in focus

LONDON (Reuters) – Euro zone government borrowing costs slid to new lows on Thursday, a day after the European Central Bank pledged to fulfill its 1 trillion-euro bond-buying program and as Greece’s financial predicament deteriorated sharply.

Seeking an edge, short-sellers turn to behavioral analysis

SINGAPORE (Reuters) – When Muddy Waters unveiled a short position on Noble Group last week, it didn’t just scrutinize the commodity trader’s accounts. It also hired a behavioral analysis firm run by former CIA staff to analyze how Noble’s executives talked on a recent earnings call.

European Car Sales Make Biggest Leap in a Year

Registrations of new passenger cars in the European Union rose 10.6 percent in March from a year earlier, their biggest gain in 12 months.