Positives
1)Every one has an opinion on the partial reopening of the Georgia economy today but it will certainly be a lesson learned on how it goes for the rest of us in coming weeks as other states announce reopening steps. We are of course also watching other states in the US and Austria, Denmark, Sweden and others, particularly those in Hong Kong, Singapore, South Korea, Taiwan and China.
2)This was a positive story (h/t BK) on the results of an antibody testing program to see to what extent the population was infected. It showed many more people had it than actually knew it which also means the mortality rate is much lower, //publichealth.lacounty.gov/phcommon/public/media/mediapubhpdetail.cfm?prid=2328&fbclid=IwAR3s3qxtsgrkFlPtlQqOxxbq8hnNCBnv4xweTuV16QuDvbyMkuVP0q-eoWQ. NY had a study too, while not perfect, that estimates maybe up to 20% of NYC residents have antibodies.
3)The administration is allowing the delay of payments of some tariffs not on goods from China or on steel and aluminum. As US companies pay the tariffs meant for others, only stubbornness and the desire to save face is keeping the remaining the tariffs on China and others.
4)While very weak relative to March, the final April UoM consumer confidence index at 71.8 was a bit better than the estimate of 68 and the initial print of 71. It is though down from 89.1 in February and 101 in January. Relative to March, most of the decline came in the Current Conditions component which fell by 29.4 pts while Expectations were lower by 9.6 pts. Not surprisingly one year inflation expectations came in at 2.1% vs 2.2% in March and 2.4% in February.
5)There wasn’t much of a change in mortgage apps this week as the average 30 yr mortgage rate held at 3.45%, the lowest on record. Purchases rose 2.1% w/o/w after a sharp decline in the weeks prior but they are still down 31% y/o/y. Refi’s were basically flat, down by .8% w/o/w but are still up by 225% y/o/y.
6)The FHFA finally stepped up with plans on how to help servicers that have been caught smack in the middle of a growing number of people requesting forbearance on their mortgage loans and the MBS holders that want their money back. Servicers will now have to only cover 4 months of forbearance (which eventually gets reimbursed) instead of 12 before Fannie and Freddie take over. HOWEVER, if a newly issued loan goes into forbearance and a lender wants to unload it to Fannie and Freddie, they would have to pay anywhere from a 5-7% fee to do so.
7)As everything changed in the 2nd half of March, the durable goods number isn’t yet capturing the new environment. That said, core orders rose .1% m/o/m, better than the estimate of down 6.7%. Shipments fell by .2% m/o/m vs the estimate of down 7%.
8)The KC manufacturing index for April fell to -30 from -17 but that wasn’t as bad as the -37 that was expected.
9)Due all to a spike in pharma production, Singapore’s March industrial production figure rose 16.5% y/o/y, well better than the estimate of down 4.9%. Pharma production spiked by 127% y/o/y and if you take this out, IP was about flat. The Singapore Economic Development Board did say that this March figure wasn’t impacted much by the global shutdowns and April will be more affected.
10)As expected China cut its 1 yr and 5 yr loan prime rates with the 1 yr down by 20 bps and the 5 yr lower by 10 bps. With the 1 yr now at 3.85% and the 5 yr at 4.65%, the PBOC has run to move but they don’t want a leverage party here likely they did after the 2008 recession.
Negatives
1)Initial jobless claims totaled 4.43mm, about in line with the estimate of 4.5mm while continuing claims, delayed by a week in its calculation, rose to just shy of 16mm from 11.9mm last week. Last week’s initial claims figure was 5.24mm and the 4 week average is 5.787mm.
2)Markit’s US manufacturing and services composite index fell to 27.4 from 40.9, now about half the level of breakeven. The services component dropped to 27 from 39.8 while manufacturing fell to 36.9 from 48.5.
3)New home sales in March, capturing contract signings so partially including pre and post economic shutdown in March, totaled 627k, slightly below the estimate of 644k and February was revised down to 741k from 765k initially. The 627k figure began to reflect the changed life in March as it’s the lowest since May 2019 and we can assume that April will be even worse.
4)March existing home sales totaled 5.27mm reflecting closings of contracts that were likely signed between November and February. That number though is the least since April 2019 where the back half of the month could have seen delayed or even canceled closings. First time buyers made up 34% of the total of amount, up from 32% in February and the highest in a while as the number of investors saw a drop in their demand. It’s easy to explain that decline.
5)If the Nikkei news report on the BoJ is accurate and that they are discussing unlimited QE, I’m not sure why the BoJ is expects to see a different outcome and if anything, it would just get worse as they further nationalize the country’s public markets and securities.
6)Japan’s April manufacturing and services PMI declined to 27.8 from 36.2.
7)The Australian manufacturing and services composite PMI in April fell to 22.4 from 39.4.
8)In an early snapshot of April trade data, South Korea said its exports for the first 20 days fell 26.9% y/o/y while imports were down by 18.6%.
9)Reflecting the beginning of the global shutdown, Japanese exports fell by 11.7% y/o/y in March, more than the estimate of down 9.4% driven by a sharp drop in auto exports. Imports were down by 5% but not as bad as the 8.7% expected drop.
10)The Eurozone April composite index plunged to 13.5 from 29.7 with the services side down to just 11.7 and manufacturing at 33.6.
11)The UK manufacturing index fell to 32.9 from 47.8 while services are down to 12.3 from 34.5.
12)French business confidence in April cratered to 62 from 94 and well below the estimate of 80.
13)German consumer confidence dropped to -23.4 from +2.3.
14)The April ZEW Current Situation index fell to -91.5 from -43.1 and that was worse than the estimate of -77.5 The Expectations component on the other hand improved to +28.2 from -49.5 and that was well better than estimate of -42 reflecting optimism that it can only get better from here. To all of this, “The financial market experts are beginning to see a light at the end of the very long tunnel. The results of the special questions on the coronavirus crisis included in the survey show that the experts do not expect to see positive economic growth until the 3rd quarter of 2020. Economic output is not expected to return to pre-corona levels before 2022.”
15)The April German IFO business confidence index was poor not surprisingly with a print of 74.3 vs 85.9 in March and below the shot in the dark estimate of 79.7. That is a record low. The Current Assessment component fell to 79.5 from 92.9 while Expectations weakened to 69.4 from 79.5. The IFO said succinctly, “The coronavirus crisis is striking the German economy with full fury.”
16)Retail sales in the UK in March were soft but as expected and that month only captured part of the shutdown.
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.