As we approach the open... - 5/28/21
As we approach the open... - 5/28/21
As we approach the open of US equity trading in New York, domestic equities are following our script with gains across the board but with small caps leading for a third day with the RUT up half percent, SPX trading just over quarter percent up, while NDX trades up around two tenths.
Major equity indices in the Asia-Pacific region ended the week on a mostly higher note. Japan's Nikkei: +2.1%, Hong Kong's Hang Seng: +0.1%, China's Shanghai Composite: -0.2%, India's Sensex: +0.6%, South Korea's Kospi: +0.7%, Australia's ASX All Ordinaries: +1.1%.
The Bank of Japan is reportedly considering a six-month extension of its pandemic aid. The country's economy minister confirmed that the state of emergency in Tokyo and other prefectures will be extended until June 20. Reserve Bank of New Zealand Governor Orr said that downside risks to the Kiwi economy have abated and that wage pressures are only present in certain sectors. He added that housing price growth has slowed dramatically.
Japan's April jobs/applications ratio 1.09 (expected 1.10; last 1.10) and April Unemployment Rate 2.8% (expected 2.7%; last 2.6%). May Tokyo CPI -0.4% yr/yr (last -0.6%) and core CPI -0.2% yr/yr, as expected (last -0.2%)
As economic worries intensify in India.
And China has lowest fix versus dollar (so strongest yuan versus dollar) since 2018.
Europe
Major European indices indices are seeking a higher finish to the week. STOXX Europe 600: +0.5%, Germany's DAX: +0.6%, U.K.'s FTSE 100: +0.3%, France's CAC 40: +0.7%, Italy's FTSE MIB: +0.2%, Spain's IBEX 35: + 0.5%.
British Prime Minister Johnson is reportedly considering a carbon tax on imports produced by heavy industry. European Central Bank policymaker Schnabel spoke against pulling back on stimulus any time soon. Meanwhile, Bank of England chief economist Haldane said that the BoE should be ready to reduce its stimulus measures - “An atypically sharp recession will be followed by an atypically sharp recovery [and] that means we shouldn’t be expecting the same policy playbook as we did after the global financial crisis .... As policymakers, we should be more ready to withdraw our stimulus,” cautioning that if accommodation is maintained for too long, “it does carry some risk of over-egging this particular pudding.” Love the analogy.
In economic data, EU confidence improved, France's Q1 GDP reading was revised down to reflect a slight contraction, indicating a technical recession during Q4 and Q1 and April consumer spending missed badly.
Eurozone's May Business and Consumer Survey 114.5 (expected 112.1; last 110.5). This was a three-year high for this report. Here are the components.
Gauges for services, retail, industry and construction all rose. European businesses are looking ahead to brighter days after the bloc suffered a double-dip recession in the first quarter amid a fraught vaccine rollout and rolling lockdowns.
“Barring a few months in 2000, December 2017 and January 2018, Eurozone economic sentiment has not been as high as it is now, even if we go all the way back to 1985,” ING’s Bert Colijn remarked. “Although downside risks to the eurozone economy remain significant, they have been falling given that the vaccination programs are picking up and COVID-19 cases are coming down rapidly.”
Germany's April Import Price Index 1.4% m/m (expected 1.1%; last 1.8%); 10.3% yr/yr (expected 10.0%; last 6.9%)
France's Q1 GDP -0.1% qtr/qtr (expected 0.4%; last 0.4%); 1.2% yr/yr (last -4.9%). April PPI -0.3% m/m (last 1.0%) and April Consumer Spending -8.3% m/m (expected 0.4%; last -0.3%). May CPI 0.3% m/m (last 0.1%); 1.4% yr/yr (last 1.2%)
UK Lloyds Business Barometer May: 33 (prev 29)
Italy's April PPI 1.1% m/m (last 0.9%); 6.5% yr/yr (last 2.7%)
Spain's April Retail Sales 41.0% yr/yr (last 14.3%)
Swiss May KOF Leading Indicators 143.2 (expected 136.0; last 136.4)
Finally, BBG story out this morning that exp's are for ECB to retain higher bond buying through the summer.
Commodities/Currencies/Bonds
Bonds - 10-yr trading around flat levels just over 1.6%.
One benefit to the drift down in yields earlier this week was mortgage rates declined.
Dollar - Moving up this morning, now over that downtrend line and testing its 20-DMA. I'd expect a break of that to get some attention (crickets so far). But technicals look very good, so I'm thinking it does it, and we start hearing media pick up on the move.
VIX - Mildly red at 16.57.
Crude - Somehow I missed that WTI closed at the highest closing level since October 2018 yesterday (in my defense it was by a hair). That seems to have unleashed some buying with it moving higher this morning.
I mentioned that Congressional approval is "sort of" required for an Iranian deal. Senate Republicans are angling to make sure it is. Would imagine this might make things a bit more difficult.
Also helping oil is analysts noting that any resumption of Iranian production will be gradual. In that regard JPM's analysis is that Iran could add 500K bbl/day by year-end 2021 and another 500K bbl/day by August 2022. I think it will be quicker than that, but they make the big bucks, so...
Gold - After yesterday's barely red close cooling off a bit more this morning.
Copper - Pulling back after yesterday's big move testing top of its 20-DMA.
Commodities - Record rice and wheat crops in India.
While Goldman says it's out of their hands.
Random stuff:
BoA bull/bear indicator pulls in a touch.
And reminder that Biden infrastructure plan will be officially released this afternoon. It looks like the spread between them and Republicans is a little larger than first thought.
And mentioned that I'd be curious with the recent articles on the subject if the concept of tapering MBS would get more traction, and it apparently has with at least one Fed member (Kaplan).
Also mentioned yesterday in my report on jobless claims that it was interesting that the top 4 states for increasing claims had kept the extra benefits while the top 4 in declining claims had gotten rid of them. Danielle DiMartino Booth has more on this.
And had no idea China made more steel than the rest of the world combined.
And California not to be outdone by Ohio's $1M and free tuition lotteries. I guess whatever gets the job done.
To see more content, including summaries of some of today's economic reports and my nightly Summary go to https://sethiassociates.blogspot.com
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