Recap 6-13-13: Is The Fire Drill Over?


Late in the day, the WSJ published an article titled “Fed Likely to Push back on Market Expectations of Rate Increase.” With no substantial market data ahead of the FOMC, and no Fed speakers, it is likely that we’ve seen the local high for yields until at least next Wednesday. This suggests that recent deleveraging moves could unwind. The chart below graphs the S&P future and the 10y yield on an hourly basis over the past month. As the chart shows, the 3 most significant tops all coincided with a new high in yields. So with the removal of the risk of higher yields over the next few days, along with the strong bounce off of the 1600 support, the probability distribution for the S&P looks skewed to higher levels in the near term.

Separately, interesting Points in the BP Statistical Review:

  • OECD oil consumption declined by 1.3% (530,000 b/d), the sixth decrease in the past seven years; the OECD now accounts for just 50.2% of global consumption, the smallest share on record. Outside the OECD, consumption grew by 1.4 million b/d, or 3.3%.China again recorded the largest increment to global consumption growth (+470,000 b/d, +5%) although the growth rate was below the 10-year average. Japanese consumption grew by 250,000 b/d (+6.3%), the strongest growth increment since 1994.
  • Global oil production increased by 1.9 million b/d, or 2.2%. OPEC accounted for about three-quarters of the global increase despite a decline in Iranian output (-680,000 b/d) due to international sanctions. Libyan output (+1 million b/d) nearly regained all of the ground lost in 2011.
  • US net oil imports fell by 930,000 b/d and are now 36% below their 2005 peak. Conversely, China’s net oil imports grew by 610,000 b/d.
  • World natural gas consumption grew by 2.2%, below the historical average of 2.7%.
  • Coal consumption grew by 2.5% in 2012, well below the 10-year average of 4.4% but still the fastest-growing fossil fuel.
  • Global coal production grew by 2%, with growth in China (+3.5%) and Indonesia (+9%) offsetting a decline in the US (-7.5%). Coal reached the highest share of global primary energy consumption (29.9%) since 1970.


  • US Retail Sales rose 0.6% vs 0.4% exp. The Control group was inline at 0.3%
  • US Jobless Claims declined to 334k vs 346k exp and prev
  • Canada New House Prices rose 2% YoY in Apr vs 1.9% exp and 2% prev
  • AU Employment rose 1.1k in May vs -10k exp and +50k prev. The Unemployment rate was stable at 5.5% vs 5.6% as the participation rate ticked lower to 65.2% vs 65.3%
  • Kurdoa met with Abe to discuss the economy and some were disappointed Kurdoa didn’t make more calming remarks following the meeting. "I told the prime minister that the BOJ, needless to say, will promote quantitative and qualitative monetary easing with a strong determination and will prop up the Japanese economy." Kurdoa told the PM that financial markets will “calm down as a reflection of positive moves in the economy.”

Upcoming Data:

  • Fri: UMichigan Confidence
  • Mon: US Empire Mfg, RBA Minutes,
  • Tue: UK CPI, German Zew, US CPI, Housing Starts, Japan Trade Balance,
  • Wed: BoE Minutes, FOMC, BoC Governor Poloz Speech