June 26, 2013
If you haven’t seen it already, check out my first TV interview with Price Futures’ Senior Market Analyst Phil Flynn here. Thank you everyone for your support over the last year and a half – I would not be here without you.
Yesterday’s Wrap-Up (A Lot of Economics)
Sentiment was generally higher across the globe after stronger than anticipated U.S. economic reports and easing concerns about China’s interbank liquidity. The S&P 500 was up nearly +1%, with all ten sectors of the index rising on the day. Treasury yields rallied across the curve to the highest levels since 2011, with tens increasing +4.51bps to 2.582%. U.S. May durable goods orders rose +3.6% versus estimates calling for 3%; April was revised higher to a 3.6% increase from 3.3%. The S&P/Case-Shiller 20 cities home price index rose +12.05% YoY in April compared to the median forecast calling for a +10.6% gain; YoY, all regions gained. The FHFA house price index rose 0.7% in April MoM compared to 1.1%; prior gain revised to 1.5% from 1.3%. May new home sales rose +2.1% MoM to an annualized rate of 476K, higher than estimates calling for 460K; the prior period was revised to 466K from 454K. Consumer confidence in June leaped higher to 81.4 compared with the median forecast of 75.1, while the prior month was revised slightly lower. The Richmond Fed’s manufacturing index came in at 8 compared to estimates calling for 2, with new order volume coming in much stronger at 9 in June after a reading of -10 in May. Same store sales increased for a third straight week, higher by +2.8% YoY.
Risk assets are moving higher, with stocks and sovereign bonds moving higher overnight, while the U.S. dollar is mixed versus its major peers with modest prices changes across the board. Concern about Chinese interbank liquidity is abating, with overnight Shibor down to 5.5% from the high of 13.44% on June 20, after the PBoC said it will safeguard money market stability. Anxiety over China’s economic growth is still weighing on markets, with industrial metals moving lower overnight; front-month copper futures are lower by -1.1%. S&P 500 futures are trading higher by +0.5%, joining euro-area stocks, with the Euro Stoxx 50 climbing +2.25% on the day. U.S. Treasury yields are lower by -4bps to 2.57%, while across the pond most sovereign spreads to the German Bund are narrowing.
Today is mostly risk-on, but this market observer is not sleeping better at night just because the PBoC says it will “safeguard” money markets; investors must continue to weigh the real global economic picture.
Today’s Economic Data Lineup (EST)
7:00am: MBA Mortgage Applications, June 21 (prior -3.3%)
8:30am: GDP Q/q, 1Q final, est. 2.4% (prior 2.4%)
8:30am: Personal Consumption Expenditures, 1Q final, est. 3.4% (prior 3.4%)
8:30am: GDP Price Index, 1Q final, est. 1.1% (prior 1.1%)
8:30am: Core PCE Q/q, 1Q final, est. 1.3% (prior 1.3%)
10:00am: Fed’s Fisher, Lacker testify on financial regulation to House Financial Services Committee
11:00am: Fed to purchase $2.75b-$3.5b debt in 2020-2023 sector
1:00pm: U.S. to sell $35b 5Y notes
3:30pm: ECB’s Draghi speaks in Paris
- A U.S. sale of $35B in 2yr notes drew weaker than average demand that nearly match the lowest level since 2011, with the bid-to-cover ratio coming in at 3.05 compared with the average of 3.63 for the past ten sales.
- The ECB’s Mario Draghi says policy makers are ready to act to support economic growth in the euro-area, while calling on national governments to curb tax increases and prioritize investment. The ECB’s monetary policy “will stay accommodative for the foreseeable future,” Draghi said today in a speech at the French National Assembly in Paris. “We have an open mind about all other possible instruments that we may consider proper to adopt,” adding that an exit remains “distant.”
- BOE policy maker David Miles said officials shouldn’t focus too much on the eventual exit from stimulus, as economies may still need more support. He said the economy was “pretty weak” and called for more easing.
- The BOE today ordered a review of banks’ exposure to interest-rate risk, which it said is not properly understood. The central bank said lenders are vulnerable to an abrupt increase in long-term interest rates as it warned confidence in the financial system remains fragile. The review is to be carried out by the Prudential Regulation Authority, which will report back in Sept.
- China announced it will begin investigations to ensure the accuracy of data filed by companies as part of efforts to improve the reliability of statistics in the world’s second-largest economy. China Information News said those found submitting misleading information for major statistics may be “severely punished” without citing anyone.
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