Weekly Day Trading Recap; Goodbye to April, May starts with a bang!

We had an exciting and profitable week of day trading in the live-trade-room thanks to some exceptional news released throughout the week.

– Most analysts are shrugging off the +0.1% advance Q1 GDP reading, citing the
well-worn excuse of unusually severe winter weather. The focus has been on the
consumption component of the first reading of Q1 GDP, which was +3.0%, roundly
beating expectations, bolstered by a 4.4% jump in spending on services. The
latter was due to the expansion of healthcare spending under Obamacare. Note
that domestic investment (both residential and nonresidential), trade and
government spending subtracted much more from growth than anticipated.

– The April jobs report greatly exceeded expectations with the 288K non-farm
payrolls gain the strongest since January 2012. Gains were broad-based across
sectors, including construction. Most importantly, nothing in the data suggests
the increase in the payroll series was a statistical fluke. The same cannot be
said for the unexpectedly steep decline in the unemployment rate to 6.3%. The
three-tenths drop in joblessness did not reflect an increase in employment – as
measured by the household survey employment actually fell by 73K – but rather
the 806K workers reporting themselves as being out of the labor market, pushing
the labor force participation rate down 0.4 points to 62.8%. Analysts highlight
that this is a very noisy measure and will certainly be revised.

– Data out this week suggested that, like much else in the US economy, the
housing industry will also bounce back from its winter weather slump. The
pending home sales data saw its first positive m/m reading in nine months in
March, widely beating expectations. Data out last week showed that existing
home sales fell to their lowest levels in nearly two years in March, but the
pending homes report suggests the downward trend may have run its course. While
there is hope for further improvement in the housing market, it looks like
there is little chance for housing reform in Washington, DC this year. The
Senate Banking Committee scheduled an April 29th markup session for the GSE
reform bill, but with committee work starting so late in the session there is
little chance for much to get done before Congress shifts into full-on election
mode.

– Federal prosecutors are planning criminal charges against BNP Paribas and
Credit Suisse Group for separate alleged offenses, raising fears that one or
both could possibly be forced out of the US market. The DoJ is seeking criminal
charges against BNP for allegedly skirting economic sanctions against Iran, and
charges against Credit Suisse for helping clients avoid taxes. Reportedly BNP
faces charges of up to $2 billion, and while there are said to be discussions
of ways to avoid revocation of the bank’s New York charter in case of a guilty
verdict, the Fed still might move to take away its licenses. Elsewhere in the
annals of financial misbehavior, Bank of America disclosed an embarrassing
error in calculating its capital ratios, forcing it to suspend capital returns
to shareholders and redo its CCAR submissions to the Fed.

– Rising crude and natural gas prices were the trend in the first quarter,
although not all of the global oil majors benefitted equally from the improved
pricing environment. ConocoPhillips and Exxon reported much
better-than-expected first quarter results, although Exxon’s lower upstream
production pulled profits down on a y/y basis while Conoco’s higher production
boosted its profits. Both beat consensus EPS estimates. Meanwhile, Chevron
missed both top- and bottom-line expectations as production fell 2% y/y and weaker
refining margins hurt bottom-line results. BP’s profits slumped and revenue was
down significantly as the company continues to shed assets. BP’s profit from
its Rosneft joint venture shrank by 75% in the quarter thanks to the Ukraine
crisis weakening the ruble.

– April auto sales were mixed. General Motor’s sales gained 6.9%, more than
expected, Chrysler slightly topped expectations and Ford missed. A GM sales
executive said retail demand was steady in the month as the economy continues
to strengthen. Toyota and Nissan’s sales were very strong, up 13.3% y/y and
18.3% y/y, respectively. Ford was the only major auto firm to report a decline
in monthly sales, however truck sales remained very strong, with overall April
sales +8%, twice the March gain. In addition, Ford announced that CEO Alan
Mulally would step down as chief on July 1st. Over his eight-year term, Mulally
transformed Ford from a money-loser to a thriving firm. He will be replaced by
Mark Fields, the current chief operating officer.

– Pharmaceutical industry deal making continued after last week’s big
announcements. There were repeated reports that Allergan would make a second
attempt to acquire Shire to fend off Valeant’s $46-billion unsolicited bid, or
even try to sell the company to Johnson & Johnson or Sanofi. AstraZeneca
disclosed this week that back in January, Pfizer had offered £46.61/share to
acquire the firm was rebuffed, and that Pfizer had renewed its approach. On
Friday, Pfizer hiked its offer for AstraZeneca to approximately £50.00/share,
valuing the firm at more than $106B. Forest Laboratories said it would buy
Furiex Pharmaceuticals for $1.5 billion to get access to its gastrointestinal
disease treatments. In other deal news, the contest to acquire Alstom’s energy
units is now between Siemens and General Electric, with bids said to be running
around €11-12 billion.

– The eagerly awaited Eurozone April annualized CPI was slightly lower than
expected, at +0.7% versus +0.8%e, while core was in-line at +1.0%. Recall that
the March figure that really lit the fire under QE talk was a mere +0.5%, so
the slight increase lent some credibility to ECB assertions that the Eurozone
will avoid deflation. In a meeting with German legislators, President Draghi
said there was still no chance of deflation in the Eurozone and that launching
a QE program was only a distant possibility. EUR/USD traded in only a slightly
broader range than last week, between 1.3800 and 1.3890.

– UK GDP saw its fifth consecutive quarter of growth in Q1, with the advance annualized
figure at +3.1%, up from +2.7% in the final quarter of 2013. This was the
highest annualized rate of growth seen in six years, and BoE Governor Carney
said the data shows the UK is entering a sustainable recovery. GBP/USD hit a
fresh 4-year highs above 1.6900 toward week’s end.

– The Bank of Japan held pat in its policy statement out this week and cut its
GDP forecast for the FY14/FY15 period to +1.1% from +1.4% prior, and maintained
its inflation outlook for the period. This marked one year since the bank
launched its ambitious program to double the monetary base and achieve 2%
inflation within two years. The March labor cash earnings report – a closely
watched gauge of consumer “cost-push” inflation from salaries – moved
to a two-year high of +0.7%, giving government officials a reason to celebrate
Abenomics. However, the April Markit manufacturing PMI saw its first
contraction in over a year, with both output and new export orders components
in contraction as well. USD/JPY spent most of the week locked in the 102
handle, only briefly surging above 103 in the immediate aftermath of the US
jobs report on Friday.