As we approach the open... - 6/30/21
As we approach the open... - 6/30/21
As we approach the open of trade of US equities in NY, after increasing global Covid restrictions, some disappointing Chinese PMI data, and potential quarter-end rebalancing, equities trade mostly to the downside with small caps again the laggard today with RUT indicated down around four tenths of a percent, SPX one tenth, and NDX around flat levels.
Major equity indices in the Asia-Pacific region were mixed on the last day of the second quarter. Japan's Nikkei: -0.1% Hong Kong's Hang Seng: -0.5% China's Shanghai Composite: +0.5% India's Sensex: -0.1% South Korea's Kospi: +0.3% Australia's ASX All Ordinaries: +0.3%.
Growth concerns related to the Delta variant persisted as reports suggested Japan might extend its restrictions in Tokyo and other regions for another 2-4 weeks. In turn, there was speculation in Australia that recent shutdown measures there will prompt the RBA to extend its QE program when it meets next week. Reports out of Hong Kong teased the prospect of the border with Macau being reopened in mid-July, albeit with limitations.
In economic data investors digested some softening PMI data out of China and some weaker than expected industrial production reports out of Japan and South Korea that stemmed in part from the semiconductor supply shortage. But Japanese construction orders and household confidence improved.
China's June Manufacturing PMI 50.9 (expected 50.8; last 51.0) and June Non-Manufacturing PMI 53.5 (last 55.2); Composite PMI 52.9 (last 54.2)
As China adds liquidity for third consecutive day.
Japan's May Industrial Production -5.9% m/m (expected -2.4%; last +2.9%); May Housing Starts +9.9% yr/yr (expected +8.3%; last +7.1%); May Construction Orders +7.4% yr/yr (last +3.3%); and June Household Confidence 37.4 (expected 35.0; last 34.1)
South Korea's May Industrial Production -0.7% m/m (expected +0.8%; last -1.6%) and +15.6% yr/yr (expected +16.1%; last +12.6%); Retail -1.8% m/m (last +2.1%)
Australia's May Private Sector Credit +0.4% m/m (last +0.2%) and May Housing Credit +0.6% (last +0.5%)
Europe
Major European indices are languishing on the last day of the second quarter. STOXX Europe 600: -0.6% Germany's DAX: -0.7% U.K.'s FTSE 100: -0.5% France's CAC 40: -0.6% Italy's FTSE MIB: -0.8% Spain's IBEX 35: -0.8%.
Risk sentiment is being dialed back reportedly by worries that the Delta variant is going to slow growth during the typically busy summer travel season.
In economic data, there was a good bit of data out today, highlighted by the eurozone's June CPI report, which came in around expectations. Some see that as a basis for the ECB to keep forging ahead with ultra-accommodative monetary policy. The UK saw a downward revision in its Q1 GDP print as consumption and exports were weaker than first estimated. German employment came in around expectations. French consumer spending and consumer confidence beat.
Eurozone's June CPI +0.3% m/m (last +0.3%) and +1.9% yr/yr (expected +1.9%; last +2.0%); Co re CPI +0.3% m/m (last +0.2%) and +0.9% yr/yr (last +1.0%)
Germany's June Unemployment Rate 5.9% (expected 5.9%; last 5.9%)UK's Q1 GDP -1.6% qtr/qtr (expected -1.5%; last +1.3%) and -6.1% yr/yr (expected -6.1%; last -7.8%); Q1 Current Account GBP -12.8 bln (expected GBP - 13.3 bln; last GBP -26.3 bln)
As German Conservatives seem to have regained their footing.
France's June CPI +0.2% m/m (last +0.3%) and +1.5% yr/yr (last +1.4%); June consumer Confidence 102.0 (last 98.0); May Consumer Spending +10.4% m/m (expected +7.5%; last -8.7%)
Italy's May PPI +1.0% m/m (last +1.3%) and +8.0% yr/yr (last +6.8%); June CPI +0.1% m/m (expected +0.2%; last +0.4%) and +1.3% yr/yr (expected +1.4%; last +1.3%)
Commodities/Currencies/Bonds
Bonds - 10-yr yields trade mildly down pushing towards the monthly lows now at 1.463%. 2-year is also down 1 basis point to 0.24%.
Dollar (DXY) - Trading a bit stronger again this morning. Remains below last week's high at $92.18.VIX - Up over a point to 16.78.
Crude (/CL) - Trading up over a percent this morning to $73.76 WTI. Reminder JJMC meeting of OPEC+ has been pushed off to tomorrow. Expectations remain for a modest increase to current levels (adding 0.5 to 1.0mbd).
Copper - After several weak days has found some strength up 1.5%. But is running into 20-DMA and a downtrend line so it has work to do if it wants to keep going.
Mortgage apps fell w/w as refis dropped by 8% and purchases by 5%. This puts purchases down 6% y/y and refis 17%. As average purchase loan size continues to increase it seems that the bottom of the market is continuing to drop out as they wait for better prices.
... The Refinance Index decreased 8 percent from the previous week and was 15 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 17 percent lower than the same week one year ago.“Mortgage application volume fell to the lowest level in almost a year and a half, with declines in both refinance and purchase applications. Mortgage rates were volatile last week, as investors tried to gauge upcoming moves by the Federal Reserve amidst several divergent signals, including rising inflation, mixed job market data, strong consumer spending, and a supply-constrained housing market that has led to rapid home-price growth,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Purchase applications for conventional loans declined last week to the lowest level since last May. The average loan size for total purchase applications increased, indicating that first-time homebuyers, who typically get smaller loans, are likely getting squeezed out of the market due to the lack of entry-level homes for sale.”...The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.20 percent from 3.18 percent, with points decreasing to 0.39 from 0.48 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
Random stuff:
Mentioned deteriorating breadth as indices hit new highs. Here's a visual.
And another day, another set of charts on how elevated the SKEW index is (measuring big downside bets/hedges), even though most modeling suggests such a large downside event remains small (and we've seen that past episodes have not been good predictors of big downside moves).
“Put skew has turned very expensive – the three-month put skew for the S&P 500 is at a multi-decades high – suggesting investors already fear that some indigestion in the equity market could trigger higher volatility,” Goldman’s Christian Mueller-Glissmann said. Still, he noted that Goldman’s volatility regime model (an aggregate of macro, macro uncertainty and market indicators) points to a very low probability of a high vol regime (left figure, above). “The probability has dropped from 100% during the height of the COVID-19 pandemic to about 5% now,” Mueller-Glissmann remarked.
But nonetheless we're starting to move back towards that prepandemic groove.
As CEO's are optimistic.
And Liz Ann was on a roll yesterday. Here's another interesting one.
And wow.
And I'm sure you've seen it by now, but just in case, spread between junk and investment grade tightest since 2007 (queue the ominous music).
As WH steps up efforts to control big business (has a faint whiff of what's going on in China to me).
As IMF and World Bank chief economists express some worried about non-transitory inflation.
As Canadian April GDP beats.
Canadian GDP (M/M) Apr: -0.3% (est -0.8%; prev 1.1%) Canadian GDP (Y/Y) Apr: 20.0% (est 19.1%; prev 6.6%)
And more hedge funds move into rental housing globally.
As more of Australia comes under lockdown. Now 50% of their population.
And the pandemic has smashed holidays/birthdays/etc. together.
To see more content, including summaries of major economic reports and my nightly summary go to https://sethiassociates.blogspot.com
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