Intraday Market Thoughts

Economic Disappointments & Surprises

by Adam Button
Apr 4, 2019 13:04

A pair of important US data points missed expectations in what has been an under-appreciated trend. The latest round Brexit negotiations crack open a window for a compromise deal. Bitcoin hit the Premium long target at 5270 from the 3650 entry. Cryptos are not a regular occurrence in our Premium service. But the opportunity to buy 3 months ago was impossible to miss. The long US CRUDE OIL Premium trade has been closed at 62.30 from the 54 entry. Below is the latest on the econonomic surprise indices for the US and Eurozone.

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Economic Disappointments & Surprises - Euro Us Citi Suprise Index Apr 4 2019 (Chart 1)

Most market watchers understand that the US economy is outperforming most of the developed world this year, but few acknowledge that numbers so far this year are disappointing. The economic surprise index from Citigroup measures how economic indicators have done relative to expectations. At the moment, the US is trailing every major economy at -57, which is the lowest since mid-2017.

The streak continued on Wednesday with ISM non-manufacturing at 56.1 compared to 58.0 expected. That's the lowest since August 2017. ADP employment was at +129K compared to the +175K consensus and was the worst since Sept 2017.

Neither of these indicators is particularly worrisome with both still at healthy levels, especially for this point in the cycle, but the disappointment isn't talked about often because it has been shadowed by this year's strong run-up in equities. If the trend continues for a few more weeks, that could change and may play into the theme of seasonal USD weakness in April that we highlighted earlier this week.

What's masked the disappointment is weakness elsewhere. Leaks suggest Italy will downgrade its growth forecast to just +0.3% this year and the consensus is a meagre +0.1%. The German and French economies have stumbled and Britain remains plagued by Brexit.

Talks between May and Corbyn got underway Wednesday and the comments afterwards were tentatively positive. At the same time, Parliament narrowly voted in favour of a bill that would block a no-deal Brexit. That gives the EU the ability to force the UK into a long extension if May and Corbyn can't put together a deal in quick fashion.

Act Exp Prev GMT
ADP Employment Change
129K 184K 197K Apr 03 12:15

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