The Good and the Bad News: Richmond Fed's Rosy Manufacturing Numbers, Fun with Forex, and Who in the Hell are These Confident Consumers?!

The big picture, brought to you via And yes, I would really like to know where I can find these "confident consumers" who made markets "soar" in response to their exuberance. WTF! Seriously, if anyone knows where the "confident consumers" are please let me know since all I see are a bunch of unemployed, scared-to-death San Franciscans teetering on the edge of depression. Thanks!

Here we go, let's take a peek at what's going on out there in the big scary world, shall we?

Bounce on data. Investors returned from their long weekend in an optimistic mood, sending the S&P500 2.6% higher. Most of the gains occurred in the first hour of the session, after consumer confidence showed the biggest monthly jump in 6 years, and the Richmond Fed manufacturing report beat expectations. The Nasdaq’s 3.6% gain was boosted by a broker upgrade for Apple. Risk aversion barometer VIX slipped to the pivotal 30 level. US treasuries suffered, the 10yr up 9bp in yield, despite good interest in the 2yr auction (where 54% of bids were indirect – a proxy for foreign buyers). Commodities oil (+1.1%) and copper (+1.9%) followed the positive tone.

EUR was sold until noon London on weak current account and industrial orders data, falling from 1.4000 to 1.3860, but rebounded completely after US equities opened strongly. GBP fell to 1.5780, but then made a new 2009 high at 1.5970. USD/JPY drifted sideways in 94.50 to 95.15 range.

AUD followed EUR down to 0.7705, and back up to 0.7865, equalling Friday night’s high.

After a dip to 0.6090, NZD shrugged off any budget concerns to reach 0.6255 early this morning, a level last seen in October 2008. AUD/NZD continued the recent downward trend, finding support at 1.2560 for now.

The Richmond Fed factory index stands out in May as being the first of the many regional manufacturing surveys to rise back into positive territory (4 from –9). Its strongest reading since March last year reflected rising orders and shipments, although not jobs (though they are falling at a slower pace). The Dallas Fed index headline more closely mirrored the “slower pace of contraction” story of the other regional Fed surveys for New York and Philadelphia. The Richmond survey also includes services (unchanged at –29) and retail (weaker at –13 from –11) components so the apparent factory upswing does not seem to have spread to optimism in other sectors this month.

The Conference Board’s consumer confidence index jumped by a steep 14 pts for the second month running, but once again it was the expectations index doing most of the work: it rose by about 20 pts in each of April and May, whereas the present situation index averaged gains of just 3.5% in the two months. The CB index’s two month gain of 28 pts is the steepest since at least the 1970s. It seems that hopes about the eventual turnaround in the economy are being boosted by the stock-market rally and some over-enthusiastic media reporting of the so-called “green shoots” of recovery, whereas the way respondents currently feel is little improved. That said, there was a further modest improvement in the assessment of the job market, though the –39 reading is still seriously weak.

The S&P Case Shiller House Price index fell a further 2.2% in March. Sales were boosted by cheap foreclosed properties which weighed heavily on prices. Nationally, prices are now down 32.2% from their July 2006 peak, and seem to have some ways further to go, although the pace of monthly decline has slowed somewhat from January’s –2.8%.

Japan’s April corporate services price index fell 2.4% in March. The embattled corporate sector, squeezed between declining sales and an uncompetitive yen, are in cost cutting mode. Pricing power in the provision of services to corporates would seem to be nil.

German GDP growth was unrevised a –3.8% in Q1, for an unrevised –6.9% yr annual decline. The detail showed a 7.9% plunge in capital investment, a 2.6% fall in construction, but a 0.5% rise in private consumption. Exports fell at nearly double the pace of imports (–10% vs –5%).

Other Euroland data included a 0.8% fall in industrial orders in March; also there was a 0.8% fall in May import prices in Germany.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.