Positives
1)//twitter.com/ScottGottliebMD/status/1260946980710350855
2)The preliminary May UoM consumer confidence index rose to 73.7 from 71.8 and that was above the estimate of 68. The swing factor on the rise was the Current Conditions component which jumped to 83 from 74.3 after falling by 29.4 pts in April. The Expectations component fell by 2.4 pts m/o/m to 67.7 and which was 92.1 back in February. Likely thanks to rising food prices and a jump in those expecting higher gasoline prices from here, one year inflation expectations jumped to 3% from 2.1% and that matches the highest level since 2014. There was a rebound in spending intentions.
3)The May NY manufacturing index, the first May industrial figure to be seen, rose to -48.5 from -78.2 and that wasn’t as bad as the -60 estimate. There were negative signs within except for prices paid which came in at +4.1. The 6 month outlook did recover to 29.2 from 7.0 on the obvious hopes that it can’t get any worse as things reopen and factories turn the lights back on. New orders, shipments, inventories and employment all bounced and are above zero. Remaining below zero are capital spending plans on tech and everything else but its less negative than seen in April.
4)With mortgage rates still at near record lows, purchase applications rose for a 4th straight week, by 10.6% from the prior week but still remains down 9.5% y/o/y. Refi’s though fell for a 4th straight week, down by 3.3% but is higher by 201% y/o/y.
5)Headline CPI in April fell by .8% m/o/m and the core rate was lower by .4% m/o/m. The headline was as expected while the core rate decline was twice the estimate. Versus last year, headline CPI was up .3% while the core rate was higher by 1.4%. Energy prices puked while food prices jumped. A key driver of inflation over the years has been services ex energy and that slowed to a 2.2% y/o/y rate and fell .4% from March.
6)Multiple Fed members have expressed their belief that there is no need for negative interest rates. Some implied ‘not now’, some implied ‘never.’
7)Chinese industrial production in April beat forecasts by rising by 3.9% vs the forecast of up 1.5% helped by factory reopenings and infrastructure spending. Property investment ytd y/o/y fell by 3.3%, a touch better than expected.
8)Aggregate financing in China in April totaled 3.1 Trillion yuan, above the estimate of 2.78 Trillion with bank loans making up 1.7 Trillion of this vs the estimate of 1.3 Trillion. This large number of aggregate financing follows an even bigger one of 5.15 Trillion in March. Along with strength in new loan growth, corporate bond issuance was also robust.Money supply growth as measured by M2 rose 11.1% y/o/y, above the estimate of 10.3%.
9)Shanghai Disney reopens.
10)Major League Baseball takes steps closer to figuring out how to play a half a season.
11)More states are gradually reopen parts of their economy.
Negatives
1)The last thing we need to see right now is a scaling up of trade tensions with China. Can we at least wait for a vaccine for that?
2)Retail sales in April taking out auto’s, gasoline and building materials (leaving us with the ‘control group’) fell by 15.3% m/o/m, three times the estimate. All in sales fell by 16.4% m/o/m. Online retail sales rose 8.4% m/o/m and 21.2% y/o/y. Everything else was awful but that’s what you get when things are closed.
3)Initial jobless claims were 2.98mm, about 500k above expectations but continues the moderation in the pace of increase since the peak in late March. Connecticut then said their state over reported by 200k. Continuing claims for the week ended March 2nd totaled 22.8mm, up almost 500k from the week prior but below the estimate of 25mm.
4)Coincident with a collapse in the economy, producer prices fell much more than expected m/o/m in April. The headline figure was lower by 1.3% vs the estimate of down .5%. The core rate was down by .3% vs the estimate of -.1% but also taking out trade saw a price drop of .9% vs the forecast of down .1%. On a y/o/y basis the headline figure is down by 1.2% while core is still up by .6%.
5)US industrial production in April collapsed by 11.2% m/o/m driven by an almost 14% decline in manufacturing.
6)The April NFIB small business optimism index fell to 90.9 from 96.4 and that compares with 104.5 in February. The internals were poor and some not surprisingly. The bottom line from the NFIB was to be expected: “The impact from this pandemic, including government stay at home orders and mandated non essential business closures has had a devastating impact on the small business economy.” They also commented on the government financing programs: “Owners are starting to benefit from the PPP and EIDL small business loan programs as they try to reopen and keep employees on staff. Small business owners need more flexibility, though, in using the PPP loan to support business operations and liability protection so that all these efforts to support small businesses are not ultimately lost in costly litigation.”
7)The Fed has now waded into the US corporate bond market. The lender of all resorts. Their balance sheet exploded higher on the week by another $213b and now is just shy of $7 Trillion at $6.93 Trillion.
8)Chinese retail sales fell 7.5% y/o/y, a bit more than the estimate of down 6% likely reflecting the extended time it will take for consumers to get confident again. Fixed asset investment year to date was in line with a 10.3% y/o/y decline.
9)In Australia, a proxy of Chinese growth but also suffering from similar forced shutdowns as the rest of us, they saw a job drop of 594k in April vs the estimate of down 575k. For perspective. For perspective, they averaged job gains of 21k per month last year on a population of about 25mm.
10)It’s old news and Q2 will obviously be worse but Germany’s economy contracted by 2.2% q/o/q and 1.9% y/o/y pretty much as expected. The German Economy Ministry discussing what has happened since said “The recovery began with the cautious lifting of the lockdown at the beginning of May. But this process will take a longer time due to the continuation of the corona pandemic.”
11)Also old news, the UK economy contracted by 2% q/o/q and 1.6% y/o/y in Q1 with the last few weeks of the quarter the obvious weight. These numbers were not as bad as feared.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.