http://www.zerohedge.com/news/2013-05-16/tragic-trifecta-initial-claims-soar-housing-starts-plunge-cpi-below-expectations

Tragic Trifecta: Initial Claims Soar, Housing Starts Plunge, CPI Below Expectations

Submitted by Tyler Durden on 05/16/2013 08:45 -0400

We didn't really need a confirmation that the economy was deteriorating and completely disconnected from the "market", but we got it nonetheless. First, Initial Claims coming at 360K, on expectations of 330K, the worst print and worst miss in six weeks, confirming that weekly data is largely noise and that there is no sustainable downward trend. The May 11 weekly print adjusted and unadjusted were 360K and 318K respectively, virtually unchanged from a year ago at 373K and 325K, showing that in one year there has been essentially no progress, and that weekly initial claims of 350K is the new normal. Of course, the last week's print was also revised higher from 323K to 328K, while initial claims also missed expectations of a round 3MM print, instead printing at 3009K.

The second negative economic number came from Housing Starts, which plummeted from a downward revised 1021K to just 853K, well below expectations of 970K, the biggest miss since January 2007 and validating the data we have shown previously in the collapse of lumber prices. So much for the "that" recovery too. The silver lining - the "no capital requiring" housing permits which rose from 890K to 1017K, which as all hedge funds know, is the easiest way to game interest in the system.

Finally, confirming that the Fed's transmission channels are completely broken, and yet paradoxically giving Bernanke even more green light to continue building up future inflation and more QE, was CPI data, which declined from -0.2% to -0.4% in April, the worst MoM drop since December 2008 despite the monetary pumpathon from the Fed and BoJ. This is the second monthly miss in a row (and fifth of the last six). The YoY figures also misses +1.7% relative to a 1.8% expectation (ex Food and Energy) - also the lowest print since June 2011, although not very unexpected in light of the previously reported weak PPI data..Much of the driver for this drop MoM and YoY are from a 4.3% drop in Energy prices MoM. That said, CPI would have been +0.1% if it was not for gasoline. Of course the bad is good mantra is in full swing as lower inflationary prints are providing ammunition for doves to push for more QE to defend their inflation goal. We wonder just how quickly oil prices will snap back once chatter of a taper is dismissed.

and.....

Thursday, May 16, 2013 1:15 AM

Brussels Puts Spain Under Surveillance; Brussels Denies Putting Spain Under Surveillance

Here is an amusing set of back-to-back headlines regarding Spain.

Via Mish-modified Google translate from La Vanguardia Brussels Puts Spain Under Surveillance for Economic Imbalances

Spain will be placed under European supervision and its political leeway in deciding what reforms the economy agree will be reduced.

European monitoring will take place in the labor market and a review of the pension system and some economic reforms from now must be agreed with Brussels. Spain gets "two extra years to reduce the deficit to make reforms to improve the competitiveness of the economy" in exchange for increased reinsurance the sources said.

It will be the first time the EU put in place the new mechanism adopted following the outbreak of the crisis to allow Brussels to monitor the implementation of the reform agenda, make proposals and, above all, ensure that measures are taken According to the schedule.

This sort of preemptive rescue aims to give the impression to markets that are under control and problems being solved, which is crucial in the case of this country case to avoid asking the rescue.

Brussels Denies Spain Put Under Surveillance

Via Google translate from El Economista, Brussels Denies Spain Put Under Surveillance.

The European Commission (EC) has denied today that it has decided to put under surveillance to Spain for their excessive macroeconomic imbalances and restated preliminary analysis indicates reform plan that the country is broadly taking adequate steps to correct its problems.

"I've seen the press reports, speaking on decisions yet to be taken, based on anonymous sources who always suggests a dubious credibility," said community spokesman Economic and Monetary Affairs, Simon O'Connor, in the daily briefing of the EC.

EU sources have stressed that the preliminary analysis of the national reforms of Spain "is very positive and nothing is going in that direction" of the country placed under surveillance, but recalled that this possibility exists in the excessive imbalances procedure, such and as agreed at the time.

The idea that anything positive is happening in Spain that would allow it to meet its budget targets is of course preposterous. Indeed, Spain was granted two more years because it could not possibly meet its targets.

Of course, Italy cannot meet its targets, France cannot meet its targets, Slovenia cannot meet its targets, and in fact no country in Europe is likely to meet its budget deficit target.

Should the denial be correct, it's simply a sign that the larger countries are now so off-target on their own accord, they have granted kick-the-can extensions elsewhere.

However, I suspect the first headline is the accurate one and Brussels is simply looking for a word less harsh-sounding word than "surveillance".

Mike "Mish" Shedlock

http://www.zerohedge.com/news/2013-05-16/surging-q1-japan-gdp-leads-red-nikkei225-and-other-amusing-overnight-tidbits

Surging Q1 Japan GDP Leads To Red Nikkei225 And Other Amusing Overnight Tidbits

Submitted by Tyler Durden on 05/16/2013 06:56 -0400

In a world in which fundamentals no longer drive risk prices (that task is left to central banks, and HFT stop hunts and momentum ignition patterns) or anything for that matter, it only makes sense that the day on which Japan posted a better than expected annualized,adjusted Q1 GDP of 3.5% compared to the expected 2.7% that the Nikkei would be down, following days of relentless surges higher. Of course, Japan's GDP wasn't really the stellar result many portrayed it to be, with the sequential rise coming in at 0.9%, just modestly higher than the 0.7% expected, although when reporting actual, nominal figures, it was up by just 0.4%, or below the 0.5% expected,meaning the entire annualized beat came from the gratuitous fudging of the deflator which was far lower than the -0.9% expected at -1.2%: so higher than expected deflation leading to an adjustment which implies more inflation - a perfect Keynesian mess. In other words, yet another largely made up number designed exclusively to stimulate "confidence" in the economy and to get the Japanese population to spend, even with wages stagnant and hardly rising in line with the "adjusted" growth. And since none of the above matters with risk levels set entirely by FX rates, in this case the USDJPY, the early strength in the Yen is what caused the Japanese stock market to close red.

Europe had a quiet session, with April CPI frozen at 1.2% Y/Y and -0.1% M/M, same as last month, same as expected. Trade data came a tad stronger than expected with the trade balance for March printing at €18.7 billion compared to the €11.5 billion expected, up from €12.7 billion. With China's trade data now mocked by all following recent revelations it is a complete sham, one wonders just what export-boosting methods Europe is using to represent a world in which suddenly everyone (Japan, China and the US) is exporting more than expected. And just who is doing all the importing? Elsewhere, Spain reported that its central government deficit reached 1.53% of GDP in Q1. With "evil" austerity obviously dead, this should be good news and lead to an imminent economic renaissance in Madrid. Or maybe like in the US, the weather was "just right" and the reason for yet another record unemployment print coming up?

In the US, today we get Initial jobless claims, the Philly Fed reading for May, CPI, housing starts and building permits. The data is obviously meaningless: if it's bad it means more QE, if it's good, it means QE is working. So any early futures weakness will be promptly transformed into a low volume buying spree by the algos - the only market participants who view the current ridiculous market as normal and are thus willing to engage the central planners who have made a diagonal straight line in stocks for the past 6 months the new normal.

Only the USDJPY matters for the S&P, so keep an eye on 103: this is the level that must be breached for yet another conclusive breakout in the US stock market which may take ou 1,700 by the end of the week, with everyone just laughing now.

SocGen with the usual overnight catalyst summary

Stocks in the US rallied yesterday for a ninth session in ten days (with Eurostoxx following in tow) against a background of weaker than forecast US data and frankly appalling eurozone Q1 GDP statistics. The first upward revision by the BoE of UK growth prospects in a long while, solid Japan Q1 GDP data and talk of a ‘phase II’ growth plan there (PM Abe to make an announcement tomorrow?) has equity bulls eating out of the hands of central banks. Bond yields are not slavishly following stocks higher, something that can be attributed to the benign inflation backdrop (to be underlined today by EU and US CPI data). A further slippage in commodity prices (Brent and WTI are down 5% from the May highs) is also keeping prices under control. The inverse correlation between commodities and the USD has been a powerful driver of currency markets and shows no sign of wavering, with participants determined to go long USD on dips. Though technically the USD has tiptoed into overbought territory against a number of G10 currencies (AUD, Swiss franc) and is close to overbought conditions against a couple of EM currencies (PLN, CLP), the appetite for USD is likely to stay elevated given the monetary easing tactics applied outside the US. A third ‘low’ US weekly claims number in a row today and five Fed speakers (of which two FOMC voters) should see the greenback cement its position, with participants ready to raise their targets for the dollar index on a break of 84.00. As we head into the closing stages of the week, it will be crucial for EUR/USD to hold its ground above 1.2877. Failure would encourage bears to step up the chase for a short term move to 1.2770.

Eurozone peripheral yields have been subject to a minor correction in the wake of this week’s supply from Italy and Portugal, but the worst part of the move appeared to have passed yesterday. 10y Greece passed a milestone by dropping below the 700bp over bunds to 680bp, levels not seen since 2010. Today brings supply from France, but even after confirmation of the economy double dipping in Q1, there should be plenty of demand.

Japanese investors have been noted buyers of OATs for the last 16 months and the 100bp pick-up in 10y maturity over equivalent JGBs should still offer plenty of appeal. For EUR/NOK and USD/NOK, keep an eye on the Norwegian Q1 GDP release (consensus +0.3% qoq and mainland +0.8% qoq). USD/NOK has returned to the upper end of the two month range but has so far failed to extend convincingly above 5.90. Support for EUR/NOK runs at 7.4850.

DB's Jim Reid concludes the overnight recap

Another day another new peak for the S&P 500. The initial data-led weakness didn’t last for long before the index surged to an intraday peak of 1662 which is nearly a thousand points above the intraday lows seen during the depths of crisis in 2009. The index finished off the day’s highs but still up +0.51% higher to close at a fresh high for the second consecutive day. It was a good day for all major sectors except for Energy (-0.37%) whilst Consumer Staples (+1.04%) and Financials (+0.95%) enjoyed the best of the gains. In the single name space, yesterday saw Google add 3.25% after the company reported a music streaming service. That brought Google’s YTD gains to 29% which equates to a near 50% outperformance relative to Apple. There was little in the way of major news developments other than the poor data flow from both sides of the pond so it seems that the weight of central bank liquidity continues to overshadow everything else that is going on at the moment.

In terms of the data flow, the Euroarea’s flash Q1 GDP estimates showed that the region recorded its 6th straight quarter of negative growth. The Q1 print came in at -0.2% against consensus estimates of -0.1% and the previous quarter’s -0.6%. Notably, France (-0.2% vs -0.1% expected), Germany (0.1% vs 0.3%) and Italy (-0.5% vs -0.4%) all posted growth numbers slightly below expectations. Italy's recession has extended to seven straight quarters, making it the longest since quarterly records began in 1970 (Reuters). The poor growth numbers gave rise to further chatter about ECB rate cuts which probably helped explain some of the latter day surge in the Stoxx600 (+0.8%). It was more of a mixed picture in the US with the NAHB homebuilder sentiment print (44 vs 43) providing a counterpoint to the below-consensus industrial production (-0.5% vs -0.2%) and Empire manufacturing (-1.43 vs 4) data.

Back to markets, and it was also a decent day for Treasuries despite the performance of equities. The 10-year and 30- yield both rallied by about 4bp to set the benchmarks at 1.935% and 3.156% at the end of the US session. Elsewhere in the rates space, Italy issued its first 30yr bond since 2009, helping the country term out the average maturity of its debt which had fallen to 6.5 years as of April (Reuters). The auction raised EUR6bn on an order book in excess of EUR12bn and means that Italy has met close to 50% of its funding needs for 2013 according to Reuters. Greek 10yr yields fell 48bp yesterday (8.6%), to their lowest level in almost three years after Fitch upgraded the sovereign to B- from CCC on Tuesday. Away from Govies, credit also rallied with the CDX IG index finishing a little over a basis point tighter even though the asset class remains a relative recent under - performer against equities. Elsewhere gold closed below 1400 after 5 consecutive days of declines after having moved broadly in lockstep with the recent Dollar strength. The Dollar index is now up 5.9% from its YTD lows which is also not benefitting moves in the broader commodity complex.

Moving on to the overnight session, it has been a mixed session for Asian equities. The Nikkei is down from its 4.5 year high despite the better-than-expected GDP print (0.9% vs 0.7%). Japanese equities are being dragged down by Financials following profit warnings from major banking groups. Elsewhere the Shanghai Composite and the KOSPI are +1% and +1.05% on the day. Japanese bond yields are steady perhaps helped by the weaker sentiment in equities whilst credit spreads around the region are moving tighter. The JPY is trading around 102 against the Dollar and it is also interesting to see that Fujitsu plans to raise domestic PC prices as the decline in Yen is boosting the cost of supplies (hardware and software) for the company. The company said the price hike will take effect by July and apply to models released in the summer. So some signs of inflation in the country. Staying in Japan, the Nikkei is reporting that the five biggest Japanese banking groups have reduced their combined holdings of JGBS by 3.7% on the year in anticipation of rising interest rates. However, they still hold around JPY118tn as of Mar13 according to the Nikkei.

Today sees another busy day on the US data calendar. Initial jobless claims, the Philly Fed reading for May, CPI, housing starts and building permits are all scheduled. A number of Fed speakers are also likely to provide headlines today including the San Francisco Fed’s John Williams who will also host a Q&A session. Eurozone trade for March and the final CPI reading for April are the key data releases in Europe.

Catharsis Ours

Thursday, May 16, 2013

Tragic Trifecta: Initial Claims Soar, Housing Starts Plunge, CPI Below Expectations

Thursday, May 16, 2013 1:15 AM

Brussels Puts Spain Under Surveillance; Brussels Denies Putting Spain Under Surveillance

Surging Q1 Japan GDP Leads To Red Nikkei225 And Other Amusing Overnight Tidbits

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