by Chris Becker
Macro Wrap
Another interesting night as US markets reopened after a public holiday and all eyes focusing on the nonsense stimulus “announced” by China. An official “no-no” from Xinhua News didn’t stop the ebullience, nor did a series of poor economic data prints, or the ECB pouring cold water on bank rescues, as covered here by Delusional Economics. Still equities bounced, bonds remained neutral (particularly peripheral) whilst the USD strengthened.
First off, German CPI print showed a deceleration, coming in at -0.2% for May, slowing down to an almost Australian 1.9% (from 2.1%). This was followed by 3 US prints – first a somewhat surprising Case Shiller house price index result .
The Composite 20 is off some 34% from the peak, but up 0.2% for March (seasonally adjusted). Non-seasonally adjusted its at a new post-bubble low (chart from Calculated Risk)
The year-on-year price move chart does indicate an uptick and a probable third rally in US house prices since the crash. The question is will it be as good as the first, or as poor as the most previous?
I hope for all Americans that house prices stay where they are. The best thing about an asset bubble crash is to inflict psychological pain that you shouldn’t rely on asset prices to fuel your economy. Perhaps the same will happen here with iron ore and coal prices, but I doubt it.
Next, consumer confidence for May came in at 64.9 – still positive, but the prior result was revised down, and this result was way below consensus and shows a decelerating trend:
Finally, the Dallas Fed Manufacturing survey truly shocked. Texas is the powerhouse State in the Union, and the index came in at minus 5.1, on expectation of positive 3 print. This provides some caution going into the very important ISM manufacturing print coming up on Friday (which is extremely correlated with the S&P500, and thus our own market).
In terms of market action, the big moves were in equities, as US markets reopened, and the bullishness from Chinese markets yesterday afternoon carried over to the European bourses, and then US. It was green across the board (details below) with US basically up 1%, Europe up 0.5% (except Spain, again).
Today
Local data is making a resurgence this week, with ABS Retail Sales out today, whilst tonight we have EMU M3 money supply and economic sentiment prints, US Redbook/Goldman Store Sales weekly prints and more house price stuff – the pending home sales index.
The SPI Futures are suggesting a slight drop for the ASX200 on the open to just below 4100 points.
Bonds:
- US 10 year Treasuries yields were unchanged with German 10 year bunds and UK 10 Gilts swapping moves (up/down 2 pips) in a very calm session for core sovereign bonds
- Italy was sold off only slightly as it edges to the “magical” 6% mark, whilst Spain strengthened by 2 points, but let’s put this into perspective – there’s been a 145 point change in the last 3 months…
- Aussie and NZ 10 year’s remain very low, at 3.11% and 3.5% respectively.
Currencies:
- The US Dollar is now at year highs, at 82.48 points, climbing over 12% since the August 2011 lows…..how’s your share portfolio doing in comparison? The USD ETF definitely has a place yes?
- This strength is because the Euro (which makes up 57% of the index) continues to weaken, falling below 1.25 again to 1.2479 against King Dollar
- The Australian dollar zigzagged all night – nothing much to report, but it still has an inherent weakness (like our economy, but you won’t hear that from the ideologically blind…) currently at 98.28 cents against the USD as of this morning
Equities:
- The Eurostoxx 50 was up 0.6% for the night, but mainly because of the majors (French CAC, German DAX and FTSE 100) all closing up around 1% or so. The Spanish IBEX 35 continues its dreadful run, down 27% for the year to date, down 2.3% last night. Hmmm. I thought when a housing bubble bursts, interest rates come down, that stock prices go up? GB???
- US re-opened from the Memorial Holiday and moved in lockstep. The Dow was up 1%, S&P500 up 1.1% and the NASDAQ up 1.2%. Big movers were RIM (owner of Blackberry), Failbook (down 10%) and Bank of America (up 4%)
Commodities:
- Finally to commodities, where the crudes were basically unchanged. WTI Crude as of this morning at $90.75USD per barrel, whilst ICE Brent was off slightly, down 0.4% to $106.7 bbl.
- Gold (USD) (which we are all debating in the MB/MA office as – is it a currency? speculation? non-dollar? shiny trinket) had a shocking return to form , slumping at the end of London trade going into the NYMEX session. The opposite PPT doing its work again? /tinfoil
- As for Iron ore, it rebounded solidly, following (leading?) other risk assets, up almost $2 per metric tonne on the stimulus nonsense news to $132.50USD per metric tonne. For context, remember it was almost $150 a tonne in mid April this year and around $180 for most of 2011.
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