Positives
1)Initial jobless claims totaled 209k, 6k less than expected and down from 217k last week (revised up by 2k). This brings the 4 week average to 212k which is unchanged with the week prior because a print of 208k dropped out. Continuing claims, delayed by a week, fell by 15k after rising by 22k last week.
2)Refi’s continue to be the only notable response to the drop in rates as they jumped 12% w/o/w and 116% y/o/y.
3)The number of job openings in June totaled 7.348mm which is down slightly from the 7.384mm seen in May but about 20k more than expected. It’s about in line with the average seen so far this year of 7.391mm. The number of hiring’s though did fall for a 2nd month and the number of people quitting also was down but the rate for each was unchanged m/o/m.
4)China’s trade data for July was better than expected but I’m sure some was pulled forward before the trade meeting at the end of the month that didn’t end well. Exports rose 3.3% y/o/y vs the estimate of down 1%. I’m sure August is going to have a surge in exports ahead of September 1st. Imports fell 5.6%, the 7th month in the past 8 down but that was better than the forecast of down 9%.
5)Japan said regular base pay rose .1% y/o/y, a punk figure but after 5 months in a row of declines. Bonus pay was higher by .9% y/o/y.
6)Japanese household spending rise by 2.7% y/o/y in June, above the estimate of up 1.1%. With expectations of another VAT hike in October, I’m sure we’ll be seeing a lot of pull forward in purchases.
7)Singapore’s July PMI rose a touch to 51 from 50.6 but business expectations fell to the lowest since early 2017.
8)Factory orders in June in Germany did bounce 2.5% m/o/m after a 2% drop in May and that was better than the estimate of up .5%. The improvement was solely led by a nearly 9% rise in non eurozone orders and capital goods as opposed to consumer goods which fell.
9)The UK services PMI for July did improve to 51.4 from 50.2 and that was better than the forecast of 50.3. Consumer spending here too was the main catalyst for the gain but Markit still said “Even growth in the service sector remains worringly subdued, constrained by a marked fall in business activity, where the rate of decline in July has been exceeded only once in the past 10 years.”
10)While we can hope that rate cuts from New Zealand, Thailand, India and Philippines will hopefully work in stabilizing growth, the medicine is not the antidote to what ails the global economy.
11)It wasn’t with Freddie but Queen as MSG this week was great, //www.youtube.
Negatives
1)While calling out a country for currency manipulation is meaningless and purely symbolic, the current circumstances reflect a level of economic ignorance and everyone is doing it anyway.
2)The all important July ISM services index softened to 53.7 from 55.1 and that was below expectations of 55.5. It’s also the weakest since August 2016. Of the 18 industries surveyed, 13 saw growth vs 16 in June. There were 5 industries that saw contraction vs just one in June. With new orders, only 11 industries saw growth vs 14 in the month prior. The ISM said what we’d expect: “The non manufacturing sector’s rate of growth continued to cool off. Respondents indicated ongoing concerns related to tariffs and employment resources. Comments remained mixed about business conditions and the overall economy.”
3)The lowest average 30 yr mortgage rate since November 2016 at 4.01% was not enough to help the purchase of a home as the MBA said applications fell 2% w/o/w, down for the 4th straight week and are now at the lowest level since March. While they are still up 6.5% y/o/y, I’d expect a much greater level of sales considering that mortgage rates are down 80 bps y/o/y.
4)The continued decline in European and Japanese bank stocks is alarming but we certainly know why its happening.
5)There was a 1.5% m/o/m decline in the June German industrial production figure vs the estimate of down .5% with declines widespread in manufacturing, mining, intermediate goods, capital goods, consumer goods and energy. The German Economy Ministry said manufacturing “remains mired in a downturn.”
6)The July Eurozone services PMI was revised a bit lower to 53.2 from the first print of 53.3 and which compares to 53.6 in June and 52.9 in May. Again, the service sector is outperforming but Markit said “there are signs that the scale of the manufacturing downturn is starting to overwhelm…The main source of expansion currently appears to be the consumer, in turn buoyed by the relative strength of the labor market. However, with the July survey indicating the weakest jobs gains in over 3 years, there are signs that this growth engine is also losing impetus, and adding another headwind to the economy for the coming months.”
7)China’s July private sector focused Caixin services PMI fell slightly to 51.6 from 52 where no change was expected and that is a 5 month low.
8)The Markit Hong Kong July PMI fell further below 50 to 43.8 from 47.9. That’s a 10 yr low and Markit said “The rate of decline in both new orders and business activity was the steepest for over a decade, reflecting worsening demand conditions brought on by an ongoing US-China trade war and an escalation in largescale political protests in Hong Kong.”
9)Japan’s services PMI fell to 51.8 from 51.9. Markit said “there were some signs that the underlying services economy was beginning to lose momentum, with employment and new business growth both easing, while optimism moderated as some firms were concerned that the looming consumption tax hike could impact demand.”
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.