DXY was up Friday night and looks close to break out. EUR and CNY fell:
The Australian dollar lifted anyway on the risk rebound:
It was stronger than EMs too:
CFTC positioning became is now extended bearish at -61k contracts:
Gold eased:
Oil was stable:
Metals soft:
Miners too:
EM stocks firmed:
And junk:
Treasuries fell:
And bunds:
Plus Aussie:
Stocks roared:
US data was again solid. Housing starts were up year on year:
Housing Starts:
Privately‐owned housing starts in July were at a seasonally adjusted annual rate of 1,191,000. This is 4.0 percent below the revised June estimate of 1,241,000, but is 0.6 percent above the July 2018 rate of 1,184,000. Single‐family housing starts in July were at a rate of 876,000; this is 1.3 percent above the revised June figure of 865,000. The July rate for units in buildings with five units or more was 303,000.
Building Permits:
Privately‐owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,336,000. This is 8.4 percent above the revised June rate of 1,232,000 and is 1.5 percent above the July 2018 rate of 1,316,000. Single‐family authorizations in July were at a rate of 838,000; this is 1.8 percent above the revised June figure of 823,000. Authorizations of units in buildings with five units or more were at a rate of 453,000 in July.
The big fall in the long bond is lifting housing (charts from WSJ Daily Shot):
While wages still strong with few layoffs:
Which, along with good productivity:
Is lifting wages:
Helping retail:
Which, in turn, is aiding industry:
And GDP gains:
From Merrill Lynch:
The data boosted our 3Q GDP tracking estimate by 0.4pp to 2.1% qoq saar. 2Q was unchanged at 1.8%.
And Goldman Sachs:
We left our Q3 GDP tracking estimate unchanged on a rounded basis at +2.1% (qoq ar).
The US is holding up while China and Europe sink. This can only push DXY to break out as it delays Fed easing.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
I took some profits on US 10 yr bonds on Friday night. There is a lot of Fed cuts / economic weakness factored in the price and I’m not so sure it’s in the data.
I’m not saying the Fed won’t cut. But the price is factoring in really aggressive cuts. I wonder if the Fed might just cut a bit less readily… which might send bond yields up some (next entry point?) and send DXY up more to boot.
nyleta
I agree bonds have gone too far too soon but the direction is clear. As for the retail sales there is Amazon Prime day and a bit of tariff related stagflation built in there. Housing permits are not construction so not as good as it looks.
Yeah, I took some profits on AUS and US/intl bonds today, too. Didn’t sell much – about 1/4 of holdings.
The Traveling Wilbur
Well, if it’ll stop you Leaning all over the place… 😉
Me personally can’t buy any more bonds than I already have, so a bit moot question wise for moi. However I can say that if I were to sell any gov bonds, the US ones would be first on the list. With possibly buying more again later.
EU and AUS bonds look like they’ll keep gurgling downwards. So I wouldn’t dream of selling either of those. Bring on the next budget update / MYEFO. Whichever comes first next. What surplus was that you were looking for Mr Friedtoacrisp?
It’ll be the budget surplus we had to didn’t have!
There, said it. First!
Arrow2MEMBER
That was my thinking (on bonds).
On surplus – they’ll probably get there. Budget has assumed a conservative (lower) iron ore price than the current price, so the budget is looking rosy tbh.
AndrewMEMBER
One gets the feeling that Trump is going to back down on his trade war with China.
Tricky situation for gold holders in the short term.
tonydd
I’m sorry, Andrew. I don’t agree. I think that Trump and his mind is have used strategy. So brilliantly that they will go down in history as amongst the class Witnesses and other strategy giants. They’re playing this perfectly and the results. They’re getting are what I would suggest exactly what they’ve planned and hoped for. Obviously, they’re not in absolute control. But within the parameters that they could have hoped for it’s going very very well indeed.
I wouldn’t say it’s working perfectly. The EU not being on side is a big issue. But yeah, it’s more or less going ok.
AndrewMEMBER
That’s ok. It is just a feeling/guess.
MountainGuinMEMBER
It was not long ago Trump announced the addition 10 percent tariff, even if he then delayed it.
Unless China offered some sort of deal he liked, he can keep waiting. His economy is healthy and a China trade war was a goal of his.
emu
How relevant are the stories of US trucking companies facing hard times? It seems contrary to the US holding up narrative. It was only 6 months ago that I was reading they couldn’t find enough workers and labour prices were booming.
I took some profits on US 10 yr bonds on Friday night. There is a lot of Fed cuts / economic weakness factored in the price and I’m not so sure it’s in the data.
I’m not saying the Fed won’t cut. But the price is factoring in really aggressive cuts. I wonder if the Fed might just cut a bit less readily… which might send bond yields up some (next entry point?) and send DXY up more to boot.
I agree bonds have gone too far too soon but the direction is clear. As for the retail sales there is Amazon Prime day and a bit of tariff related stagflation built in there. Housing permits are not construction so not as good as it looks.
https://www.alhambrapartners.com/2019/08/15/retail-sales-amazon-pick-up/
Max Keiser does bonds…..it’s down the rabbit hole we go !
https://www.youtube.com/watch?v=ElxmkyQkbbU
Leaner.
More for moi. 😉
Don’t fret Wilbs. I didn’t sell the lot, and more importantly I kept my Aus ones.
Would you be buying US bonds at today’s prices? Serious q.
Yeah, I took some profits on AUS and US/intl bonds today, too. Didn’t sell much – about 1/4 of holdings.
Well, if it’ll stop you Leaning all over the place… 😉
Me personally can’t buy any more bonds than I already have, so a bit moot question wise for moi. However I can say that if I were to sell any gov bonds, the US ones would be first on the list. With possibly buying more again later.
EU and AUS bonds look like they’ll keep gurgling downwards. So I wouldn’t dream of selling either of those. Bring on the next budget update / MYEFO. Whichever comes first next. What surplus was that you were looking for Mr Friedtoacrisp?
It’ll be the budget surplus we had to didn’t have!
There, said it. First!
That was my thinking (on bonds).
On surplus – they’ll probably get there. Budget has assumed a conservative (lower) iron ore price than the current price, so the budget is looking rosy tbh.
One gets the feeling that Trump is going to back down on his trade war with China.
Tricky situation for gold holders in the short term.
I’m sorry, Andrew. I don’t agree. I think that Trump and his mind is have used strategy. So brilliantly that they will go down in history as amongst the class Witnesses and other strategy giants. They’re playing this perfectly and the results. They’re getting are what I would suggest exactly what they’ve planned and hoped for. Obviously, they’re not in absolute control. But within the parameters that they could have hoped for it’s going very very well indeed.
I wouldn’t say it’s working perfectly. The EU not being on side is a big issue. But yeah, it’s more or less going ok.
That’s ok. It is just a feeling/guess.
It was not long ago Trump announced the addition 10 percent tariff, even if he then delayed it.
Unless China offered some sort of deal he liked, he can keep waiting. His economy is healthy and a China trade war was a goal of his.
How relevant are the stories of US trucking companies facing hard times? It seems contrary to the US holding up narrative. It was only 6 months ago that I was reading they couldn’t find enough workers and labour prices were booming.