Jobless Claims, China, Europe and more

Initial jobless claims totaled 234k, 16k less than expected and down from 259k last week and 261k in the week before. The 4 week average was 250k vs 255k last week and 247k in the week before. Continuing claims, delayed by a week, fell 24k after last week’s rise of 65k. Bottom line, for the past 3 weeks claims have come in much different than expectations, both up and down but the smoothed out 4 week average is still very low. See chart:

Until proven otherwise, I think the landscape remains the same in that employers are hopeful for faster growth and are thus keeping their employees at the same time its getting tougher to add more qualified workers. The estimate for private sector payrolls tomorrow is 170k vs 227k in February.

The private sector weighted Chinese Caixin services PMI in March fell .4 pts to 52.2 and which is a 6 month low. Caixin describes this level as “only a modest rate of increase.” New orders fell to the weakest since September while employment was up slightly. Backlogs were little changed. The inflation input cost component rose the highest since February 2013 mostly due to higher salary costs. Prices charged was the most since August 2015. The services index follows a weaker manufacturing one and Caixin summed up the report by saying “Weaker increases in new business have clouded the economic outlook, and investors should watch closely for signs of a turning point in the second quarter.” Oh man do the Chinese authorities have a balancing act on their hands with their unrealistic desire to grow 6.5% while trying to contain and slowly deflate a debt bubble. Let’s hope the Trump/Xi coffee talk goes smoothly as the two largest economies should be fully embracing each other. The Shanghai index traded higher by a 1/3 of a percent but the H share index was down by .9% and the Hang Seng was lower by .5%. Those in Hong Kong because of the FX peg have the pleasure of reading the FOMC minutes.

The only thing of note in Europe was the German factory orders figure for February which rose 3.4% m/o/m after a 6.8% decline in January. Combining the revision with the new number has it around in line with expectations. Most of the rebound came from domestic demand as foreign orders were flat. The Economic Ministry said “Manufacturing orders recovered after a sharp decline at the start of the year. Order intake was lower than in the very strong Q4, which was characterized by bulk orders. However, the volume of orders as well as the business climate in the manufacturing sector rose and a slight upturn in manufacturing is to be expected.”

With ECB monetary policy completely incompatible with the health of the German economy, Bundesbank President Jens Weidmann today said “The discussion is not whether monetary policy should be fully hitting the brakes, but it’s about whether we should continue to fully step on the accelerator. I could have absolutely envisaged a less expansionary monetary policy, especially since many economic indicators are developing positively.” He then went on and spoke about the growing risks of keeping policy too easy for too long, “The central bank must be careful that its policies don’t ultimately do more harm than good.” I say it’s too late. The bubble mold has been cast when you have a German 2 yr note yielding -.79%.

Mario Draghi just so happened to be speaking in Frankfurt today whose turf he has to most vociferously defend himself on. His obsession with higher inflation remains persistent, “We have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook, which remains conditional on a very substantial degree of monetary accommodation.” He’s out of his mind and he still believes in the efficacy of negative interest rates, the single worst economic idea ever. See again the question I posed in paragraph 1. The euro initially sold off on dovish Draghi but is now back to unchanged. European sovereign yields are a touch higher.