A Bumpy Economic Rebalancing?

Yesterday the mkt was singing:

"What a day for a daydream....What a day for a daydreaming' boy, And I'm lost in a daydream, Dreamin' bout my bundle of joy.."

Yes - the mkt rocketed higher - for what reason really? I mean - was it just a head fake or did I miss something?

And this morning - global mkts are singing "Everybody Hurts" -

"When your day is long, and the night, The night is yours alone, When you are sure you've had enough, Of this life - Well - just hang on.."

Because sometimes everything is wrong and everybody hurts - but as they say - "This too shall pass" When you ask? - Well no matter what the brain trust tells you - I am thinking NOT anytime soon....

US futures are giving it all back this morning.......currently down 13 pts after hitting our heads on 2080 yesterday..... - which for now is proving to be resistance. (See yesterday's note). So much for that daydreamin' boy.......

Overnight we found out that:

China April Manufacturing data contracted, we also learned that the EU cut Euro Zone Inflation AND GDP forecasts for 2016, Puerto Rico goes 'Belly Up', both UBS and HSBC disappoint, Commerzbank plunges, BMW profits takes a hit, Baker Hughes plans to CUT $500 million in costs (hmmm - what does that mean?) after the Halliburton/Baker merger got nixed, The IMF warns of a 'bumpy economic rebalancing' - A BUMPY ECONOMIC REBALANCING? No way...... and the CEO at Two Sigma - had a V8 moment - telling Bloomberg that

"He is very worried that machines will take jobs"....

Can you believe it - this guy who runs a $35 bil hedge fund using nothing but ARTIFICIAL INTELLIGENCE and MACHINE LEARNING is now concerned that computers "could soon cost large swaths of the workforce their jobs..." I mean this guy is good......like we needed him to point that out. Is it possible that no one else sees this? I mean you can't make this stuff up....who would believe you?

So stocks went wild yesterday posting their biggest gain in more than 12 days.....teasing once again that everything is good in the world.......Love the fact that there are some people talking up all of these 'better than expected corp earnings' being responsible for this 'feel good mood'.....ARE YOU KIDDING ME?

Yesterday saw the Fed feed the beast - regardless of what the macro data told us...... stocks rallied yesterday.....reclaiming some of last week’s losses and while the major indexes closed in positive territory much of the early trading showed a lack of direction. So we can say that the strength may have been due to some bargain hunting, as traders/investors picked up some cheap stock...However, trading volumes were a bit light heading into Friday's release of the NFP report. May day holidays around the world also contributed to the muted volumes....OK...remember - The first few days of any new month benefit from FED policy - leading into the jobs report - liquidity from reverse repos loans provided to financial institutions to start a new month or quarter are always one thing to point at....especially after the selloff we saw last week.

Yesterday we learned that the ISM manufacturing Index fell to 50.8 in April from 51.8 in March, confirming once more that growth remains elusive in the manufacturing sector - which btw has been the case for some time now. So all of this action continues to hammer the dollar, causing other currencies to rise.......in this case think the Yen - which surged to a new 18 month high against the dollar causing the Nikkei to plummet another 3% overnight.....so just clear this up - the Nikkei has lost over 6% in two trading days......should we be concerned? Could this be a precursor of things to come around the world?

Look - Japan is discovering that negative interest rates are not helping the situation...in fact they are having an inverse effect - making people save more to protect future purchasing power and opt for less risky assets because there’s so little transparency on the future. Same is happening in Europe....the private sector is actually saving more than it did when rates were 'normal' (think positive). In effect, this is curbing lending vs. encouraging borrowing and that is causing the economy to 'circle the drain' - as they say in the nursing home...... and so we see the EU cutting 2016 forecasts!

Overnight in Asia - the China Caixin Manf Index fell to 49.4 vs. 49.7 in March - remember anything below 50 signals contraction.....so this is not a 'better than expected report' at all......Couple that with negative tone out of Japan and the fact that the RBA - Reserve Bank of Australia - CUT rates UNEXPECTEDLY by 25 bps to a record low of 1.75% should tell you what? Do you really need me to explain it anymore.....Those mkts ended mixed - Japan - 3%, Hong Kong -1.85%, China +1.85% and ASX +2.1% (think more Kool Aid..)

In Europe those mkt are all under pressure.....mining, banking and autos getting smashed......macro data weakens causing a re-evaluation of the broader economy is causing investors to re-price risk assets....FTSE - 1.2%, CAC 40 - 1.67% DAX - 2.34%, EUROSTOXX - 1.9%, SPAIN -2.35% and ITALY -2.2%.

Here at home - at 7 am - futures are down 15 pts...as the sun rises over the Atlantic.....and the mkts take it all in......We heard from PFE this morning - and they beat - that stock is UP $1 in early pre-mkt trading....look for Estee Lauder, NYTimes and Sprint before the day begins..... Crude oil inventories are due out and any sign of increasing inventories will cause more pressure on oil - which is currently trading lower by 0.46 cts/barrel at $44.31. Gold prices are flat right now...but remain at the highs not seen in 15 months amid the weaker dollar and limp global growth..... I suspect that we are still in the 2050/2080 trading range for today....No real eco data due today...but tomorrow look for ADP employment - exp of +195k jobs.....in line with the expected NFP report on Friday.

Watch for 2 FED speakers today... Loretta Mester - (Cleveland) at 10:30 and Dennis Lockhart (Atlanta) at 7 pm.....

 

Summer Veal Cutlet

For this you need - Veal cutlets, flour, eggs, seasoned bread crumbs, olive oil, butter, fresh arugula, Ripe Cherry Tomatoes, sliced red onion, fresh mozzarella, lemon juice, and shaved parmegiana cheese.

In a bowl – beat 3 eggs (add a splash of milk), on a separate plate put some flour and on a third plate – place the seasoned breadcrumbs.

Begin by pounding the cutlets to thin them out. Now – in this order – dredge the cutlet in the flour – dip in the egg wash and then cover in breadcrumbs – pressing gently so that the breadcrumbs adhere to the cutlet. Place on a plate. Place in the fridge for about an hour.

After an hour – heat up a lg roasting pan and add some oil and butter - enough to cover the bottom of the pan. Turn the broiler on high. Once the oil is hot add the cutlets - to the oil - dipping one side in the oil and then immediately flipping them to broil them. Once one side is broiled then flip again and broil the other side. Cook the cutlets until they are crispy golden brown on both sides. Remove and place on a warmed plate. Top the cutlet with some arugula, then the cherry tomatoes (cut in half), and the red onion. Squeeze fresh lemon juice sparingly – drizzle some olive oil – season with s&p and top with shavings of Parmegiana cheese.

Set you outdoor dining table, light the candles, put on some soft jazz and serve.

Simple yet outstanding. Enjoy you favorite wine –for this I actually preferred a chilled white vs. a heavy red.



Buon Appetito.