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Dear Janet, US economic growth is the weakest in 3 months and your favorite inflation indicator is below mandated levels – why are June rate-hike odds still at 70%?
So there’s this… (worst economic growth in 3 years)
And today there’s this… (inflation below your mandate)
So why are you still jawboning this?
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Will third time be the charm for Trump’s attempt to pass a Republican healthcare bill? After two consecutive failed attemps to repeal Obamacare at the end of March and again last week, on Monday morning Trump’s two key advisers, first Gary Cohn then Reince Priebus, said they think there are enough votes to pass the revised GOP healthcare proposal.
“Do you have the votes for healthcare?” Cohn was asked on CBS This Morning. “I think we do,” he answered.
“Do you have the votes for health care?” — @CharlieRose
“I think we do.” — WH economic adviser Gary Cohn http://pic.twitter.com/Kh5WLsIbis— CBS This Morning (@CBSThisMorning) May 1, 2017
“This is going to be a great week,” Cohn continued. “We’re going to get healthcare down to the floor of the House. We’re convinced we got the votes and we’re going to keep moving on with our agenda.”
Cited by The Hill, Cohn, who serves as director of the National Economic Council, also touted the administration’s tax plan. “We’re very excited about our tax plan as well,” he said. “We’re going to continue to drive President Trump’s agenda forward.”
Trump chief of staff Reince Priebus echoed Cohn’s optimism telling CBS that he thinks the vote “will happen this week” and added that “we’ll have tax reform by the end of the year.”
Furthermore, Axios reports that House Republicans told Democrats that Wednesday is the likely day for the vote on repealing and replacing the Affordable Care Act.
That’s one reason they wanted to announce the budget agreement last night — they wanted to get it out of the way ahead of the health care vote.
Speaker Ryan’s office did not confirm the story, but it also didn’t issue a denial. Another leadership aide says no official call has been made. It’s probably a good idea not to make other plans for Wednesday, just in case.
After pulling legislation from the House floor in March, and failing to secure enough votes at the end of last week when Trump’s first 100 days in office ran out, GOP leaders are now vowing they will not call a vote until they have enough votes for its passage.
On Friday, House Majority Leader Kevin McCarthy said he did not “have anything scheduled for next week,” regarding the healthcare bill. However, he added that “as soon as possible, we will bring that bill to the floor.”
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Having both flexed their rhetorical muscles over the weekend (EU proclaiming their negotiating stance would be "firm" and UK saying the talks would be "confrontational"), it appears behind the scenes of the May-described "constructive" meeting with EU's Juncker was a disaster.
While the UK Government described the meeting on Wednesday as "constructive," saying the pair discussed other international issues in a "useful working dinner," a very different account emerged in the Frankfurter Allgemeine (FAZ) newspaper's report.
Britian's Independent reports that the seemingly disastrous meeting between Theresa May and Jean-Claude Juncker has been laid bare in a report that reveals the European Commission President told her: "I leave Downing Street 10 times more sceptical than I was before," claiming Mrs. May had unrealistic expectations about the length and process of negotiations.
The PM reportedly insisted on discussing other world problems as well as Brexit and refused to accept that the UK owed the EU billions of euros, saying there was no such demand in EU treaties.
She was told in response that the EU was “not a golf club”.
She was told that would not be possible, because the UK would become worse off in the future as a “third country” – a country outside of the EU and the customs union.
The morning after the meeting, Mr Juncker called German Chancellor Angela Merkel and reportedly said Ms May “lived in another galaxy” and was “deluding herself”.
It prompted Ms Merkel to quickly amend a passage in her speech to the EU’s Brexit summit, a speech that would be described as her toughest yet.
“I have to put it in such clear terms because unfortunately I have the feeling that some in Britain still have illusions,” she said.
“But that would be a waste of time.”
Since the release of the FAZ report, a British government spokesperson has said that they do not "recognize the account of the May-Juncker meeting in a German Newspaper." So it appears the games have begun.
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Despite the exuberant hype sourrounding Trump's election, Americans appear to have once again turned to saving – not spending – as the savings rate jumps to 5.9%, the highest since August.
Income growth has slowed…
But Spending has now gone nowhere for 2 months…
But Americans' spending habits are starky different…
As the post-Trump world for Americans is one of saving… not spending…
Not exactly what the 'soft' data surge in sentiment predicted eh?
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Authored by Mike Shedlock via MishTalk.com,
The Fed likes to brag about the “We saved the world” recovery.
However, the unfortunate truth of the matter is a record Half of American Families Live Paycheck to Paycheck.
Does it Matter? Let’s investigate.
Unprepared for Nearly Anything
Deleveraging? Where?
A Fed study shows U.S. Households Will Soon Have as Much Debt as They had in 2008.
The Federal Reserve announced Friday that the U.S. has $1 trillion in credit-card debt. Consumers hit that number in the fourth quarter of 2016, but eased on revolving credit during January 2017. The Fed announcement showed revolving consumer credit hit more than $1 trillion once again in February 2017.
“Credit card debt is rising quickly, but delinquencies are still really low,” said Matt Schulz, a senior industry analyst at the credit cards site CreditCards.com. “Many Americans are doing a good job of controlling their debts, but eventually with big debts and rising interest rates, it’s likely that something will have to give.”
Paycheck to Paycheck “Good Job”
Excuse me for asking but if half the nation lives paycheck to paycheck, is that really indicative of doing a good job at managing debt.
And as for “low delinquencies”, I remind you of my April 26 article Subprime Credit Card Losses Bite Capital One: Income Down 20%, Charge-Offs Up 30%.
Nonetheless, I remind you of an important perception.
We Saved the World
Two Reasons Not to Worry
The real crux of the matter is point number two.
The Fed does not give a damn about the bottom half of the economy even though it spouts continual lies about “income inequality.
The Bottom 50% Do Not Matter
As long as the Fed can keep stocks and home prices elevated, there is no concern about the food-stamp, rent-subsidized, Medicaid-supplement, disability-income, Obamacare-subsidized 50% of Americans struggling paycheck-to-paycheck.
That money rolls in guaranteed, month after month!
That 50% cannot afford a house is irrelevant as long as suckers keep paying $500,000 to two-bedroom shacks in LA.
The game is to keep asset prices up so that the top 50% keep spending. The bottom 50% are taken care of by government (taxpayer) subsidies noted above.
Here’s the real deal: Fed Expects a Second Quarter Rebound, Higher Equity Prices.
Repeat Performance
The Fed needs to keep asset prices elevated even though it’s pretty clear concerns are mounting over bubbles.
Can the Fed save the world again?
Previously, the bottom third did not matter. Then the bottom 40% did not matter. Now the bottom 50% do not matter.
That statement is a bit over the top. By how much I don’t know. But the trend is clear, as is the fly in the ointment.
Brexit was the first warning shot. Trump was the second.
As soon as the bottom 65% don’t matter, those 65% may vote to take matters into their own hands.
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Overnight Media Digest
WSJ
– President Donald Trump left open the possibility of military action against North Korea, adding that he wouldn’t be happy if Pyongyang conducts another missile test. on.wsj.com/2pwGL3B
– U.S. President Donald Trump invited President Rodrigo Duterte of the Philippines to the White House during a telephone call over the weekend, laying the groundwork for a first meeting after the maverick Filipino leader last year declared his “separation” from the U.S., a longstanding ally. on.wsj.com/2pOcL5Y
– China’s sharp rise in air travel is compounding chronic flight delays here, making flying an ordeal for increasing numbers of airline passengers and threatening to choke growth in the country’s booming aviation sector. on.wsj.com/2oP6hEb
– The Society for Worldwide Interbank Financial Telecommunication has left banks largely responsible for their own cyberdefense. In the past year, a spate of cyberattacks has penetrated banks along Swift’s less-defended perimeter, shaking confidence in the network used by banks for cross-border transactions. on.wsj.com/2oOM6Gg
– Nintendo Co said it used aircraft to ship its new Switch videogame machine in its first month on the market, an unusual and costly logistics measure responding to unexpectedly high demand. on.wsj.com/2oP64ki
FT
Twenty-First Century Fox is in talks with Blackstone Group to launch a joint bid for U.S. broadcaster Tribune Media Co, according to two people familiar with the negotiations.
Sheikh Ahmad Al-Fahad Al-Ahmed Al-Sabah, the FIFA Council member who also runs the Olympic Council of Asia, said on Sunday he was resigning all his posts in football after being drawn into the latest bribery scandal to hit the game’s governing body.
Financial Conduct Authority has hired Vincent Coughlin as its chief criminal counsel, taking over from Claire Lipworth, who has joined law firm Hogan Lovells.
NYT
– Twenty-first Century Fox Inc is in talks with Blackstone Group LP, the giant investment firm, to make an offer for Tribune Media and its stable of television stations, people briefed on the negotiations said on Sunday night, a move that would potentially forestall a rival bid for Tribune. nyti.ms/2oOfAUO
– Congressional leaders reached a bipartisan agreement on Sunday to fund the government through September, according to aides from both parties, effectively ending any suspense about the possibility of a government shutdown next weekend. nyti.ms/2oO7gEv
– During their “very friendly conversation”, the administration said in a late-night statement, Mr. Trump invited Mr. Duterte, an authoritarian leader accused of ordering extrajudicial killings of drug suspects in the Philippines, to visit him at the White House. nyti.ms/2oO4r6s
– Starting on Sept 9, NBCUniversal will turn one of its smallest cable properties, Sprout, into a network called Universal Kids, said Deirdre Brennan, who will oversee the effort. nyti.ms/2oNQW6O
– The Turkish government expanded its crackdown on dissent and free expression over the weekend, purging nearly 4,000 more public officials, blocking access to Wikipedia and banning television matchmaking shows. nyti.ms/2oNXrXb
Canada
THE GLOBE AND MAIL
** Purdue Pharma has finally agreed to settle a long-standing class-action lawsuit, which began a decade ago between the maker of OxyContin and lawyers representing as many as 2,000 Canadians who got hooked on the drug after their doctors prescribed it. tgam.ca/2pxmUB9
** The federal government, owner of Ridley Terminals Inc on British Columbia’s north coast, has been placed in a difficult position by British Columbia Premier Christy Clark’s request to ban thermal coal exports from the province. tgam.ca/2px64lW
** The widening divergence between Internet regulations in Canada and the United States may threaten investment in Canadian innovation, warns Roslyn Layton, one of U.S. President Donald Trump’s telecommunications advisers. tgam.ca/2px6HvO
NATIONAL POST
** Defense minister Harjit Sajjan will get a chance Monday to explain to Parliament why he tried to deceive an audience of Indian security experts by claiming that he was “the architect” of Canada’s biggest military operation in Afghanistan. bit.ly/2pxf36H
Britain
The Times
Former Rolls-Royce Chief Executive Ralph Robins is understood to have drafted in lawyers as prosecutors consider bringing charges against individuals linked to the FTSE 100 aerospace company’s corruption scandal. bit.ly/2pxPrIU
The Guardian
Coffee company Nespresso – part of Swiss multinational Nestle – is to trial a scheme for consumers to recycle their used aluminium capsules for the first time in the UK, in the face of a growing environmental backlash against increasingly popular single-serve pods, many of which end up in landfill. bit.ly/2qrT7Jr
Supermarket “best before” labels could be phased out while shops should be forced to sell oddly shaped vegetables under proposals from MPs who have warned the government it needs to do more to tackle food waste. bit.ly/2pkPAz5
The Telegraph
Unilever’s 6 billion pounds sale of its margarine business has run into opposition from the consumer goods giant’s influential European works council, which has raised concerns about possible job losses from any deal. bit.ly/2oVMPAQ
Rolls-Royce’s plan to boost bosses’ bonuses to attract and keep hold of the top staff it says it needs to oversee its turnaround could be the latest focus of shareholder anger over executive pay. bit.ly/2pvkGCl
There are fresh fears for the British high street as concerns mount that prospective new owners of the Coast, Oasis and Warehouse chains will shut a raft of stores in an attempt to improve the fortunes of the brands. bit.ly/2oN6LdW
Sky News
Two Scottish fund management giants plotting a near-£11bn merger are to hand tens of millions of pounds in retention bonuses to star executives to prevent them quitting during the deal. Aberdeen Asset Management Plc and Standard Life Plc have agreed to pay roughly 35 million pounds to a cluster of executives who manage huge amounts of client money. bit.ly/2oMGrAp
The Government is to take another step towards recouping the vast sums of money injected into the banking system in 2008 by selling 3 billion pounds of Bradford & Bingley (B&B) mortgage loans. bit.ly/2pxXUvF
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Over the weekend, President Trump had what the White House called “a very friendly conversation” with Philippine President Rodrigo Duterte, whose bloody war on drugs has killed thousands of people since he took office last summer. Trump praised Duterte, a tough-talking populist whose style resembles that of his American counterpart, for “fighting very hard to rid his country of drugs” and invited him to visit the White House.
As of April 23, according to numbers reported by the Philippine National Police (PNP), the anti-drug campaign Trump praised had resulted in the deaths of 2,717 “suspected drug personalities killed in police operations,” often in fishy circumstances. Duterte, who won office while promising to fill Manila Bay with the bodies of criminals and after his election urged Philippinos to murder drug dealers and addicts, encourages police to shoot first and ask questions later, creating an atmosphere of impunity in which extrajudicial executions disguised as self-defense proliferate. Human Rights Watch (HRW) found “a damning pattern of unlawful police conduct in these killings, designed to paint a veneer of legality over summary executions.” As of January 9, according to the PNP’s numbers, another 3,271 people had died in “extrajudicial, vigilante-style, or unexplained killings.” HRW says many of these homicides “are in fact death-squad-style extrajudicial executions by police and police agents.”
After talking to Trump in December, Duterte reported that the president-elect “was wishing me success in my campaign against the drug problems” and “understood the way we are handling it.” This time around, a Duterte spokesman described Trump as “expressing his understanding and appreciation of the challenges facing the Philippine president, especially on the matter of dangerous drugs.” The message Duterte is getting from Trump is that there is nothing wrong with his homicidal anti-drug crusade. “By essentially endorsing Duterte’s murderous war on drugs,” John Sifton, HRW’s Asia advocacy director told The New York Times, “Trump is now morally complicit in future killings.”
The Times claims the president’s chumminess with Duterte left some of his aides “stun[ned]” and “slack-jawed.” It reports that “two senior officials said they expected the State Department and the National Security Council, both of which were caught off guard by the invitation, to raise objections internally.” Externally, however, the administration sees nothing amiss in Trump’s embrace of the Philippine strongman, which fits a pattern of admiration for authoritarian leaders around the world.
On ABC’s This Week yesterday, Jonathan Karl, quoting HRW, noted that “Duterte’s outspoken endorsement of the [anti-drug] campaign implicates him and other senior officials in possible incitement of violence, instigation of murder and command responsibility for crimes against humanity.” In light of those charges, Karl asked White House Chief of Staff Reince Priebus, “why is President Trump honoring President Duterte now with a visit to the White House?” Priebus said “we need cooperation among our partners in Southeast Asia” to confront the threat posed by North Korea’s nuclear arms. “This is somebody with an abysmal human rights record who has been accused of basically mass extrajudicial killings,” Karl said. “Did that not come up in the phone call?” Apparently not. “The issue on the table is North Korea,” Priebus replied, “and there is nothing right now facing this country and facing the region that is a bigger threat than what’s happening in North Korea.”
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North Korea’s regime defied an increasingly broader chorus of voices, including the US, Japan, China, South Korea and Russia, saying on Monday that it will continue its nuclear weapons tests, and warned it would “speed up to the maximum” its measures for bolstering its nuclear deterrence in response to the U.S. increasing “aggression and hysteria” against the country, a North Korea Foreign Ministry spokesman says in statement distributed by the official Korean Central News Agency.
“Now that the U.S. is kicking up the overall racket for sanctions and pressure against the DPRK, pursuant to its new DPRK policy called ‘maximum pressure and engagement’, the DPRK will speed up at the maximum pace the measure for bolstering its nuclear deterrence,” a spokesman for North Korea’s foreign ministry said in a statement carried by its official KCNA news agency. North Korea’s “measures for bolstering the nuclear force to the maximum will be taken in a consecutive and successive way at any moment and any place decided by its supreme leadership,” the spokesman said.
North Korea has carried out five nuclear tests and a series of missile tests in defiance of U.N. Security Council and unilateral resolutions. It has been conducting such tests at an unprecedented rate and is believed to have made progress in developing intermediate-range and submarine-launched missiles. The communist nation test-launched a missile on Saturday which Washington and Seoul said was unsuccessful, but which nevertheless drew widespread international condemnation.
U.S. President Donald Trump has said a “major, major conflict” with North Korea is possible over its nuclear and ballistic missile programs, while China said last week the situation on the Korean peninsula could escalate or slip out of control.
Over the weekend, Trump said a “major, major conflict” with North Korea is possible over its nuclear and ballistic missile programs, while China said last week the situation on the Korean peninsula could escalate or slip out of control. As preemptive deterrence, the US has sent the nuclear-powered USS Carl Vinson aircraft carrier group and the Michigan nuclear sub to waters off the Korean peninsula to join drills with South Korea.
A diplomatic row was averted over the weekend, when South Korea said the United States had reaffirmed it would shoulder the cost of deploying the Terminal High Altitude Area Defense (THAAD) anti-missile system to counter the North Korean threat, days after Trump said Seoul should pay for the $1 billion battery. As Reuters reports, in a telephone call on Sunday, Trump’s national security adviser, H.R. McMaster contradicted the president, and reassured his South Korean counterpart, Kim Kwan-jin, that the U.S. alliance with South Korea was its top priority in the Asia-Pacific region, the South’s presidential office said.
While the recent THAAD deployment has drawn protests from China, which says the powerful radar that can penetrate its territory will undermine regional security, and from residents of the area in which it is being deployed, the United States is seeking more help from China to rein in Pyongyang’s nuclear and missile development.
Trump, asked about his message to North Korea after the latest missile test, told reporters: “You’ll soon find out,” but did not elaborate on what the U.S. response would be.
“There is nothing right now facing this country and facing the region that is a bigger threat than what is happening in North Korea,” White House Chief of Staff Reince Priebus told ABC’s “This Week.”
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Besides the upcoming FOMC meeting on May 2-3, and French & Italian politics – the decisive runoff round of the French election takes place this Sunday – this week’s releases are dominated by US payrolls expected to come around 170k. The busy release calendar continues with Norges bank and RBA meetings as well as global manufacturing PMIs.
The market’s focus during the week of 5/1 will begin to shift away from the micro as the CQ1 earnings season winds down and back to the macro w/a slew of eco data and some central bank decisions scheduled (including the FOMC on Wed 5/3 and US jobs on Fri 5/5; also note that Yellen is scheduled to speak Fri after the jobs report at 1:30pmET). The eco data out this week could be crucial in helping to resolve the current debate around growth
In the US, the data calendar will be very busy this week, highlighted by Monday’s personal income and spending data (including the PCE Deflators) and Friday’s April employment data. We expect solid income, modest spending, and relatively soft deflators, continuing the theme of very tame inflation data that we have seen over the past quarter. On employment, we expect a solid rebound in payroll growth following last month’s weather-induced disappointment and the overall tone will be consistent with the notion that the labor market is at or near full employment. Specifically, we also expect that AHE will rise on trend and that the unemployment rate will be unchanged at 4.5%. Rounding out the calendar, Wall Street expects modest declines in the ISM indexes, though both will remain at solid outright levels, a bump in auto sales following the March swoon, and solid construction spending as well.. In addition, there are several scheduled speaking engagements by Fed officials this week.
FOMC decision preview – the Fed statement on Wed (there won’t be a supplemental or Yellen presser) is expected to be pretty innocuous. JPM believes the Committee’s goal will be to acknowledge the softer run of data while still keeping June on the table as a live meeting. The bank continues to expect the Fed to hike rates at the June meeting, but does not think the statement will send a strong signal of impending action. Look for the statement to say that economic growth slowed early in the year, but to add that it is in part due to transitory factors. The second paragraph of the statement will continue to note that risks are roughly balanced.
Earnings preview – this week is another fairly big one for earnings with 131 S&P 500 companies and 85 Stoxx 600 companies reporting. Amongst the big names are Apple (Tuesday), BP (Tuesday), Facebook (Wednesday) and Shell (Thursday). As Jim Reid notes, we’ll see if they can continue what has been a decent start to earnings season to date. Indeed the trend so far is one of the strongest on record. In the US we have had reports from about 60% of the S&P 500 and 81% have beat at the earnings line, coming in 6.7% above consensus. This compares to the historical beat of 73% of companies and a median beat of 3.4%. This is made even more impressive by the fact that consensus estimates were not downgraded in the month leading up to earnings season compared to a typical 1% downgrade. He notes also that the results so far point to 15% EPS growth in Q1 which is the fastest pace since 2011. Our European equity strategists note also that EPS growth of Stoxx 600 companies has accelerated to 23% with reported earnings being 13% above pre-season expectations.
Breakdown of key events by day from Deutsche Bank:
On Monday, with it being a public holiday in the UK, Germany and France amongst other countries today, the main focus will be on the US session where there are a number of important releases include the PCE core and deflator readings and personal income and spending reports for March, as well as the ISM manufacturing reading for April and construction spending in March.
Tuesday kicks off in Asia with the Japan services and composite April PMIs and Caixin manufacturing PMI in China. Over in Europe all eyes will be on the final April manufacturing PMIs as well as a first look at the data for the periphery and UK. The Euro area unemployment rate will also be released. In the US tomorrow the only data due out is vehicle sales in April.
Kicking things off on Wednesday will be Germany where the April unemployment numbers are due to be released. Shortly after that we’ll get Euro area PPI for March and then the advanced Q1 GDP report for the Euro area. In the US on Wednesday we’ll get the ADP employment change report in April and the final April PMIs and ISM non-manufacturing reading. Also on Wednesday all eyes then turn over to the Fed meeting.
In Asia on Thursday the early data is out of China with the remaining April Caixin PMIs. In Europe we’ll also get the remaining April services and composite PMIs as well as Euro area retail sales in March and UK money and credit aggregates data. In the US on Thursday the data includes initial jobless claims, Q1 nonfarm productivity and unit labour costs, March trade balance, March factory orders and the final revisions to March durable and capital goods orders.
With little of note in Europe on Friday the main focus will be on the US where we’ll get the April employment report including nonfarm payrolls.
Away from the data, this week’s Fedspeak is reserved for Friday when we’ll hear separately from Fischer, Williams and Yellen, as well as a panel debate with Rosengren, Evans and Bullard. Over at the ECB this week we are due to hear from Nouy and Nowotny on Tuesday and Lautenschlaeger, Praet, Draghi and Mersch on Thursday. At the BoJ we are due to hear from Kuroda on Tuesday, as well as receiving the minutes from the BoJ meeting last month. Other important events this week include a Fox interview with US Treasury Secretary Steven Mnuchin today, a meeting between Germany’s Merkel and Russia’s Putin on Tuesday, Wednesday’s live televised debate between French presidential candidates Macron and Le Pen, Wednesday’s meeting between President Trump and Palestinian Authority President Abbas and UK local elections on Thursday.
Finally, expect earnings to also be a big focus for markets this week with 131 S&P 500 companies reporting and 85 Stoxx 600 companies reporting. Amongst those reporting are Apple, BP, BNP Paribas, Facebook, Merck, Tesla, Time Warner, Pfizer, HSBC, BMW, Shell and VW.
* * *
Another weekly calendar, this time from JPM:
Global breakdown of key events courtesy of Bank of America:
* * *
Full breakdown of main US events together with sellside estimates from Goldman
Monday, May 1
Tuesday, May 2
Wednesday, May 3
Thursday, May 4
Friday, May 5
Source: GS, BofA, DB, and Jefferies
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