Euphoric read is back/New jobs stat/JGB yields continue higher/Euro trading well
As measured by Citi, euphoria is back to matching the mid April highs at .45 in its index and follows the extreme read in last weeks Investors Intelligence survey with the Bull/Bear spread above 40 pts. This index is particularly relevant in terms of its statistical significance according to Citi. As we know markets go up about 70% of the time, when someone argues that the odds of going down are at least 80% a year from now, it's worth taking note. Obviously anything can happen but just be aware. Citi says, "Historically, a reading below panic supports a better than 95% likelihood that stock prices will be higher one year later, while euphoria levels generate a better than 80% probability of stock prices being lower one year later."
Ahead of next Friday's May payroll report, this past Friday I learned a new statistic from my close friend Danielle Dimartino Booth and her team's brilliant Quill Research. From their Daily Feather, it cited the biweekly CivicScience Economic Sentiment index. "Its new job component gauges the outlook for employment prospects and closely tracks the US Economy subindex (in the S&P Global PMI employment component), suggesting respondents view both in the same vein. The deterioration since the January 16th local high of 41.6 through the May 21st reading of 33.5 presaged the early-May jump in household fear measure captured in the UoM consumer sentiment survey. Higher Unemployment Expectations' eight-point leap to 40% in early May was twice a normal month's move." Worth noting.
It still is not helping the yen much but Japanese JGB yields continue to move higher and the 10 yr in particular is up to 1.03%. On Friday, Governor Ueda didn't seen perturbed by the move, which in turn furthers the move. He said "Long term bond yields are determined by financial markets in principle. I will continue to carefully monitor moves in the market." It's funny hearing the Governor talk about market driven pricing considering the BoJ owns half the JGB market. This was followed today by the Deputy Governor Shinichi Uchida who said "While we still have a big challenge to anchor the inflation expectations to 2%, the end of our battle is in sight." I expect another rate increase in July and believe the pressure is building from the Finance Ministry to stem the yen weakness.
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