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August 3, 2017 By Peter Boockvar

BoE / Claims / PMIs


The UK

UK gilt yields are plunging, the pound is getting slammed and the FTSE 100 is outperforming all European markets after the BoE slightly trimmed its GDP forecasts and continues to focus more on their fears with Brexit than the current higher inflation squeeze that UK households are experiencing. While obviously on a much smaller scale, it’s the old 1970’s trade off of wanting lower unemployment but at the cost of higher inflation. Evidence proved that controlling the latter is the key precursor to the former. I’m just amazed that after more than a year after the vote and the subsequent rate cut that followed to .25%, the BoE can’t find the will to just take back that rate cut as none of their fears came close to being realized. Their expanded QE program will at least stay in place. The vote was 6-2 with the same 2 dissenting last time.

….

The UK services PMI was up by .4 pts to 53.8 and was .2 pts above the forecast. Employment rose to the best level in 17 months and “input cost inflation remained strong in July, driven by rising food prices, energy bills and salary payments.” BOE, take note, again. Overall, Markit referred to the current figure as reflecting a “subdued” rate of expansion.


The United States

US Initial jobless claims totaled 240k, down 5k from last week and that was 3k less than expected. The 4 week average did tick down to 242k from 244k and continues at its modest pace of claims reflecting the modest supply of labor and demand for qualified warm bodies. Continuing claims, delayed by a week, rose by 3k after falling by 12k last week.

….

After the extreme read in yesterday’s II data surveying professional newsletter writers, today’s AAII measure of individuals saw a neutral stance. Bulls did rise 1.7 pts to 36.1 which is the most in 3 months but the Bears jumped by 7.8 pts to 32.1 off the lowest level since December. We’ve thus gone from an 8 month low in bears to a 6 week high in one week. It is this weekly EKG type volatility why I don’t pay much attention to AAII week to week unless it gets to extremes. Those that are neutral fell from 9.4 pts to 31.8.

….

Ahead of the US ISM services index today, Japan’s services PMI fell 1.3 pts to 52 which is a 5 month low. Again, Japan’s economic data remains very uneven where there is just been no such thing as ‘firing on all cylinders.’ China’s Caixin private sector focused services PMI was basically unchanged m/o/m at 51.5 vs 51.6 last month. This matches the lowest level since May 2016 as we continue to see divergence between big state owned firms and private small and medium sized businesses.

 


Asia

India’s services PMI tanked to 45.9 from 53.1 and that was in response to the introduction of the new Goods and Services tax which created chaos in terms of compliance. Over time, it is a huge positive game changer for this most bureaucratic and regulatory red tape democracy that is the midst of major change for the better. Evidence that the negative impact will only be short lived, one year business expectations are at the highest level in a year.

….

PMI’s in Hong Kong and Singapore were up slightly and both sit at a touch above 50 at 51.3.

 


Europe

The European services PMI for July was left unrevised at 55.4 as expected and it’s the 2nd straight month at this level which is still very good (relatively speaking for Europe) but is the lowest since January. Italy was a standout on the upside while Spain’s services index fell along with Germany and France. As for the combined manufacturing and services composite index, Markit said “The surveys indicated a slight cooling in the pace of growth in July, but this is still an encouragingly upbeat picture of business conditions.” In terms of pricing and the ECB, “Input prices and output charges continued to rise in July. However, rates of increase eased to eight and six-month lows respectively. As the data was about in line, the euro is flat at $1.186 vs the US dollar which in turn is particularly weighing on the DAX again. European sovereigns ex UK are modestly higher. All eyes are on Mario Draghi as he speaks in 3 weeks in Jackson Hole.

 

 

Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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