· US Initial Jobless Claims basically unchanged at 404k last week vs 405k exp and 401k prev.
· Australia Employment improved 20.4k in Sept vs 10k exp and -9.7k prev. This took the UE rate down to 5.2% vs 5.3% exp and prev.
· China’s Trade Balance declined to 14.5bn in Sept vs 16.3bn exp and 17.8bn prev
What IS unusual is that historically, backwardation occurs during rallies. This makes sense – supply shortages increase the convenience yield, and hence, backwardation. Obviously this is not the case now. CFTC data suggest recent price action has been driven predominantly by Managed Money, which has flipped short for the first time since last October. This dichotomy suggests that Brent Crude could be an attractive long for growth bulls.
Separately, some macro takeaways from JPM’s earnings:
1. Loans actually grew at a healthy clip last quarter, driven by both wholesale as well as credit card segments.
2. However, this is offset by the fact that Nonperforming Asset formation has stopped falling and actually increased a bit. Although NPAs still declined, we may have seen the end of earnings beats off of reserve releases for a while.
3. Consolidated NIM declined just 6bps QoQ, despite a sharp drop in securities yields on the back o lower funding costs. It remains to be seen if this applies to its peers.
These trends are consistent with a late stage growth segment of the business cycle. The NPA formation is particularly noteworthy – but arguably these trends are already priced into equity valuations.