• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The Boock Report

  • Home
  • Free Content
  • Login
  • Subscribe

December 14, 2018 By Peter Boockvar

Succinct Summation of the Week’s Events – 12/14


Positives

1) China will remove its 25% auto tariff they put in place in July on US exports and they will start buying soybeans again in January. While we are just removing a negative, let’s hope it is a precursor to the positive of something substantive agreed upon with respect to protecting technology patents.

2) After an unexpected rise in claims over the past 4 weeks, they dropped sharply for the week ended December 8th. Claims totaled 206k, 20k less than expected and vs 233k last week (revised up by 2k). This brings the 4 week average back down to 225k from 229k last week which was the most since April. Continuing claims, delayed by a week, rose 25k after falling by a net 25k in the two prior weeks.

3) Core retail spending (ex gas, auto’s and building materials) jumped .9%, well more than the estimate of up .4% and October was revised up by 4 tenths to a .7% gain. Online retailing remained strong with a 2.3% m/o/m gain and 12.1% y/o/y increase. Online retailing in particular remained strong with a 2.3% m/o/m gain and 12.1% y/o/y increase. Expect an increase to Q4 GDP estimates off these numbers.

4) The CPI stats were as expected. There was no change to the headline figure in November from October. Versus last year it’s up 2.2%. The core rate was higher by .2% for a 2nd month and is also up by 2.2% y/o/y vs 2.1% in October. It marks the 9th straight month above 2%. Services ex energy rose .2% m/o/m for a 4th straight month and up 2.9% y/o/y. As for the goods side, and likely reflecting higher tariffs and expensive transportation costs, rose .2% ex food and energy after a .3% rise in October. The y/o/y change was only up .2% but follows a long string of negative prints.

5) Thanks in part to a stronger US dollar, import prices in November fell .3% ex petro, more than the estimate of a one tenth decline.

6) With another drop in the average 30 yr mortgage rate for a 3rd week and back below 5% to 4.96% the MBA said mortgage applications to buy a home rose 2.5% w/o/w and are up 3.6% y/o/y. Refi’s were up as well, rising by 1.8% w/o/w but remain down by 34% y/o/y. The average 30 yr rate is now down 21 bps over the past 4 weeks so get a below 5 handle mortgage while you can.

7) The number of job openings in October totaled 7.079mm, about as expected while September was revised down slightly to 6.96mm. The record high was 7.293mm back in August. Hiring’s did rebound by 196k after a loss of 210k in September but for a 2nd month there were layoffs, totaling 16k. The number of quitters also declined by 50k and the quit rate ticked down by one tenth to 2.3%.

8) Relevant only from a very short term contrarian perspective, the AAII said Bulls fell 17 pts w/o/w to 20.9, the least since May 2016. Bears jumped by 18.4 pts to 48.9, the most since April 2013.

9) While a lagging indicator, the Chinese jobless rate in November did fall to 4.8%, matching a multi year low.

10) China’s November CPI moderated to a 2.2% y/o/y increase from 2.5% in October and below the estimate of 2.4%. It was a slowdown in the pace of food gains as CPI ex food and energy grew by 1.8% y/o/y, the exact pace seen in October. PPI was up by 2.7% y/o/y, the slowest since October 2016 but comparisons were tough as last November PPI was up by 5.8% y/o/y. Lower commodity prices are the main reason.

11) The positive within the Japanese Tankan report was that capital spending plans are expected to see an increase of 14.3%, the best since 1990.

12) With the pullback in energy prices, Japan’s PPI fell .3% m/o/m, more than the estimate of down .1%. The y/o/y gain though was still 2.3% but down from 3% in October. It’s now 20 months in a row growing above 2%.

13) Japan’s October machinery orders rose 7.6% m/o/m after an 18% drop in September but that was slightly below the estimate of 9.7%.

14) The positive news out of Europe for employees was that Q3 labor costs rose 2.5% y/o/y from 2.3% in Q2 and that is matches the biggest increase since 2009.

15) The Italian 10 yr yield fell 15 bps on the week to back below 3% as it looks like the Italian government will agree to a 2019 budget deficit at 2% instead of their initial desire for 2.4%.

16) Theresa May has been given another lifeline with her confidence vote victory. The rest of the process though still seems in disarray.

17) In the UK, for the 3 months ended October 79k new jobs were added, well more than the estimate of 25k. The unemployment rate though did hold at 4.1%, just off the lowest level since the 1970’s. Also positively, wage growth further improved as weekly earnings ex bonus’ was higher by 3.3% y/o/y, one tenth more than expected, up one tenth from the month prior and that’s the best in 10 years. While there was no Brexit impact here, the November jobless claims count did increase by another 21.9k and is the 3rd straight month above 20k on average for the first time since 2011.

18) The UK economy in the 3 months thru October rose .1% m/o/m as expected after no growth seen in the month prior. The 3m over 3m change was up .4% vs .6%.

19) The German ZEW economic expectations index (surveying investors) for December did improve to -17.5 from -24.1 and that was 7.5 pts better than expected. The current situation component was weaker though, falling to 45.3 from 58.2 and 10 pts below expectations. The ZEW said “Although the rise in economic expectations is a welcome one, it should not be over interpreted. The assessment of the economic situation has worsened dramatically for both Germany and the Eurozone. This is indicative of relatively weak economic growth in the fourth quarter. In addition, uncertainties also remain in terms of the looming international trade dispute and Brexit, which have a particularly negative impact on private investment and Germany’s exports.”

20) German exports did surprise to the upside in October with a .7% m/o/m gain vs the estimate of up .4%. September was revised higher by 4 tenths to less of a decline of .4%. Again, who knows what was organic and what was front loading.

21) The Sentix economic confidence index for the Eurozone in December fell to .3 from 8.8. That’s the weakest since December 2014. They said “The economy is slimming down at a considerable pace, again challenging politicians and central banks. Whether trade disputes, the Italian crisis, unrest in France and Belgium or Brexit: it’s coming from all corners at the moment.”

22) As a kid whose formative childhood years took place in the 1980’s, I congratulate Harold Baines and Lee Smith for getting into the Baseball Hall of Fame and Def Leppard, The Cure and Stevie Nicks for getting into the Rock and Roll Hall of Fame. //www.youtube.com/watch?v=D4dHr8evt6k , //www.youtube.com/watch?v=rE3jKTs5ZQ8 , //www.youtube.com/watch?v=ojGKSgug_FM

 


Negatives

1) The leveraged loan market had a bad week and has joined IG and HY in selling off. This category is bigger than HY in dollar amount outstanding. If the Fed is almost done hiking and growth will be slowing, the allure of floating rate debt and junky credits clearly changes. The S&P/LSTA Leveraged Loan Index is at the lowest level since October 2016, down 3 pts to 95.5 cents on the dollar over the past two months.

2) The Markit US manufacturing and services PMI for December weakened to 53.6 from 54.7 with both components lower m/o/m. That’s the lowest since May 2017. Markit equates this level to 2% growth. They said “New order inflows hit the lowest since April of last year and expectations regarding future business growth have slipped to the lowest for 2 ½ years. The surveys reveal greater caution in relation to spending amid uncertainty about the economic outlook, linked in part to growing geopolitical concerns and trade wars.” With respect to inflation, “price pressures meanwhile cooled as lower oil prices feed through, yet rising tariffs remain a concern for many companies, keeping input cost inflation above the survey’s long run average.”

3) According to the Duke University/CFO Global Business Outlook survey, “nearly half (48.6%) of US CFO’s believe that the US will be in recession by the end of 2019 and 82% believe that a recession will have begun by the end of 2020.” A director of the survey said “All of the ingredients are in place: a waning expansion that began in June 2009, heightened market volatility, the impact of growth reducing protectionism, and the ominous flattening of the yield curve which has predicted recessions accurately over the past 50 years.” While the CFO’s surveyed could be very wrong in their predictions, for the sole reason that they think there is a good chance of recession coming, they will act accordingly, aka, more conservatively. Expect to hear a lot of deleveraging from Corporate America in 2019.

4) The November headline PPI was up by .1% m/o/m vs the estimate of no change. The core rate was higher by .3%, two tenths more than expected. Versus last year, headline PPI was up by 2.5% and the core rate is higher by 2.7%. Higher transportation costs remain a problem for those that use trucks to deliver anything. Prices here jumped 1% from October and are up by 7% y/o/y. Rail was no relief as prices rose by .6% m/o/m and 6.5% y/o/y.

5) The NFIB small business optimism index for November fell to 104.8 from 107.4. That matches the lowest since March. The NFIB said “The general consensus among forecasters is that the fourth quarter will be solid but slower. Growth appears to have peaked early this year and will slow as we move into 2019.” The NFIB is mostly citing “a lack of qualified workers to fill open positions and a low rate of labor force growth.”

6) While US industrial production was better than expected with a .6% increase vs the estimate of up .3%, it was completely offset by a 3 tenths downward revision to the October number. Also, manufacturing production was flat instead of rising by .3% and October was revised down by 4 tenths.

7) Retail sales in China were up 8.1% y/o/y, well less than the estimate of up 8.8%. That’s the slowest rate of growth since 2003. Industrial production grew by 5.4%, 5 tenths below the forecast and the weakest print since 2002. Auto sales fell 14% y/o/y. Fixed asset investment was one stat about as expected with its 5.9% y/o/y ytd increase.

8) Putting aside their deleveraging goals, Aggregate Financing in China totaled 1.52T in November, about 170b higher than expected. While still down y/o/y, it was double the level seen in October. Bank loans made up 1.25T of this, 100b more than forecasted. Higher corporate bond issuance was a catalyst for the increase as it jumped m/o/m. The shadow side saw loan growth slow further. Total financing though has declined by 15% y/o/y for the first 11 months of 2018. Much has to do with the crackdown on non bank lending. This is also reflected in M2 money supply growth which is rising at an 8% y/o/y rate, matching the slowest pace since at least 1996 that I have data on.

9) Chinese exports were up 5.4% y/o/y in November, almost half the estimate of up 9.4%. Imports were higher by just 3%, well below the forecast of up 14%. The surplus with the US in particular hit a record high as exports jumped 9.8% ahead of year end while imports collapsed by 25% (helped by lower oil prices but certainly also lessening demand).

10) A China proxy that is Australia saw its manufacturing and services composite index for December fall to 52.4 from 53.9 but follows a 1.9 pt gain in November. Also of note, “Business sentiment dropped to a 2 1/2 yr low during December. While companies generally expect to see output rise on the back of higher workloads, signs of demand slowing acted to dampen confidence. Optimism was lower across both the manufacturing and service sectors.”

11) Japan reported its quarterly Tankan data for Q4 and it was a mixed bag. The headline print was 19 for large manufacturers which was 1 pt better than expected and unchanged with Q3 but the Outlook index fell 4 pts q/o/q and was 2 pts less than expected. The services index rose too but the Outlook was down also. For smaller companies, the news for both manufacturing and services was mixed too.

12) The Eurozone manufacturing and services composite index fell to 51.3 from 52.7 and 1.5 pts less than expected. It’s a 4 yr low and now barely above the breakeven of 50. France was particular weak with its comp index falling to 49.3 from 54.2. Markit said “While some of the slowdown reflected disruptions to business and travel arising from the ‘yellow vest’ protests in France, the weaker picture also reflects growing evidence that the underlying rate of economic growth has slowed across the euro area as a whole. Companies are worried about the global economic and political climate, with trade wars and Brexit adding to increased political tensions within the euro area. The surveys also point to further signs that the struggling autos sector continued to act as a drag on the region’s economy.”

13) Industrial production in the Eurozone in October was about as expected with a .2% m/o/m increase but September was revised down.

14) UK industrial production in October was weak with manufacturing down by .9% vs the estimate of no change.

15) Mario Draghi said he has “continued confidence with increasing caution” on the economic backdrop and believes that QE is a permanent fixture of monetary policy. With the epic bond bubble he has created, I don’t believe his legacy will be looked at with admiration.

16) The Swiss National Bank kept policy unchanged as expected with their rate at -.75%. They also expressed no interest whatsoever in changing this as “Risks are to the downside, as is the case with the global economy. In particular, a sharp slowdown internationally would quickly spread in Switzerland” which means they are completely trapped.

Filed Under: Free Access, Weekly Summary

Primary Sidebar

Recent

  • July 1, 2023 The Boock Report is now On Substack
  • June 6, 2023 Travel remains strong and the credit crunch is on
  • Subscribe
  • Free Content
  • Login
  • Ask Peter

Categories

  • Central Banks
  • Free Access
  • Latest Data
  • Podcasts
  • Uncategorized
  • Weekly Summary

Footer

Search

Follow Peter

  • Facebook
  • LinkedIn
  • Twitter

Subscribe

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.

Read More

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.

Copyright © 2025 · The Boock Report · The Ticker District Network, LLC

  • Login
  • Free Content
  • TERMS OF SERVICE