Business

Following yesterday's modest drop in US crude production and yuuge build in inventories, headlines about possible Venezuela meetings sent algos into panic-buying mode. This morning the headlines are from Nigeria, whose Petroleum Minister "expects a dramatic price move" claiming a meeting between OPEC and NOPEC will happen on March 20th. Combine that idiocy with significant US Dollar weakness this morning and the surge in Oil ETF share creation and the perfect storm of higher prices in oil (as hedgies pile in).

For many months, the general consensus was that the "malaise" in US manufacturing (which is clearly in a recession) is isolated, and would not spread to the service sector. That is no longer the case.

As a very gloomy Markit report noted earlier,

What a different four weeks makes.

Four weeks ago, the S&P 500 had just taken out critical support. Everyone was panicking that the market was about to implode.

1.     At that time, China was continuing to devalue the Yuan as its economy collapsed.

2.     Europe was tumbling based on Draghi’s inability to generate inflation.

3.     The US economy was rolling over sharply as deflation arose courtesy of US Dollar strength and a Fed rate hike.

From the narrative-destroying 49.8 preliminary print for US Services PMI (the lowest since the government shutdown in 2013), today's final February Services PMI printed an even worse 49.7 (below 50.0 expectations) even as stocks have soared in the last 2 weeks. Business confidence tumbles to its lowest since Aug 2010 (record lows). This drops the composite PMI to a dismal 50.0, implying negative GDP growth in Q1.

Less than 24 hours ago we presented the latest reason by JPM's Mislav Matejka explaining why the equity strategist refuses to buy this market, to wit: "equities are down ytd, but notably the ’16 P/E is not much cheaper today than it was at the start of the year. In fact, for the US, the P/E multiple is currently higher than it was on 1st January, at 16.8x vs 16.6x then."