U.S. Jobless Claims Lowest Since March 1973 The number of Americans applying for unemployment benefits fell to the lowest level in 44 years last week, more evidence of a healthy labor market.
March Rate-Hike Odds Rise in Shadow of Tepid Data
“We’re as close to our mandates as we’ve been in a very long time. The case for a rate increase in March has come together, and I do think it’s on the table for discussion.” — Federal Reserve Governor Jerome Powell
Eurozone economic growth near six-year high as rates of expansion accelerate across ‘big-four’ nations
Growth of eurozone economic output accelerated to a near six-year record in February. At 56.0, up from 54.4 in January, the final Markit Eurozone PMI® Composite Output Index rose to a 70-month high and was unchanged from the earlier flash estimate.
Output growth was led by the manufacturing sector. Improved inflows of total new orders and new
export business drove the rate of expansion in manufacturing production to its highest since April
2011. Growth momentum also strengthened in the service sector, with business activity rising to the
greatest extent for over five-and-a-half years.
(…) All of the ‘bigfour’ economies reported stronger increases in output. Growth hit an 18-month high in Spain, a 34-month high in Germany, a 69-month peak in France and was the sharpest since December 2015 in Italy.
Stronger growth of output and new orders had a positive impact on business confidence, which rose
to a new series-record high. Companies indicated that they expect economic and market conditions to improve further over the coming 12 months.(… )
Faster growth of incoming new orders led to a further accumulation of backlogs of work at
eurozone manufacturers and service providers alike. This encouraged job creation in both sectors,
taking the combined rate of increase in employment to its highest in over nine years.
Staffing levels were raised at accelerated rates in Germany, France and Italy. (… )
Cost inflation rose to a 69-month record in February, mainly due to higher purchase prices, the
weak euro exchange rate and increased staff costs. Rising input costs were commonly passed on to clients, as selling prices increased to the greatest extent in over five-and-a-half years.(… )
The rate of expansion in eurozone service sector output gathered momentum in February. The final
Markit Eurozone PMI® Services Business Activity Index rose to 55.5, its highest level since
May 2011 but slightly below the earlier flash estimate of 55.6. The rate of increase in incoming
new work also picked up to a 70-month high.
The growth acceleration was broad-based by nation, with all of the ‘big-four’ service economies
seeing faster expansions of business activity and new orders. (… )
Backlogs of work rose at the quickest pace since May 2011, with increases signalled in all five of the
national service economies covered by the survey. The combination of rising activity, new orders and backlogs led to increased business confidence and also encouraged further job creation.
Positive sentiment rose to a near-six year record, amid widespread expectations among companies
that business activity would be higher in 12 months’ time. Meanwhile, employment rose for the twenty eighth successive month, with the rate of increase the second-fastest over the past nine years. (… )
Input prices rose at the quickest pace since June 2011 in February, reflecting higher staff costs and increased purchase prices (the latter due in part to rising commodity costs and the weak euro
exchange rate). Average output charges also posted a modest increase, with the rate of inflation
accelerating slightly. Germany, Spain and Ireland all saw selling prices rise, in contrast to the further
reductions implemented in France and Italy.
The Caixin China Composite PMI™ data (which covers both manufacturing and services) indicated a slight improvement in the rate of output expansion across China in February. The Composite Output Index rose from January’s four-month low of 52.2 to stand at 52.6 in February, to signal a moderate increase in overall Chinese business activity.
The uptick in the headline index was supported by faster growth in Chinese manufacturing production during February. That said, the rate of output expansion was moderate overall, and weaker than those seen in the final quarter of last year. At the same time, services activity growth softened slightly in February, with the latest increase the slowest seen in four months. The seasonally adjusted Caixin China General Services Business Activity Index was down to 52.6 from 53.1 in January, to indicate a modest pace of growth.
In line with the trend for overall activity, growth in composite new business quickened to a solid pace in February. Furthermore, it was the second-fastest rate of composite new order growth since March 2013 (after December 2016). A marked rise in new orders placed with manufacturers (the second-strongest in 31 months), helped to lift total new work. Nonetheless, services companies also registered a solid upturn in new order intakes, with the rate of expansion unchanged from that seen at the start of the year. Anecdotal evidence indicated that improved client demand and expansion into new markets helped to drive new orders higher in the latest survey period. (…)
Capacity pressures persisted in February, with backlogs of work rising across both the manufacturing and service sectors. Although marginal, the latest rise in unfinished work at services companies was the fastest seen since the start of 2010. In contrast, the modest accumulation of backlogs seen at manufacturing companies was the slowest seen in nine months. At the composite level, outstanding business rose for the twelfth successive month, albeit marginally.
Average input costs continued to rise sharply at Chinese manufacturers in February, despite the rate of inflation easing to a four-month low. Service providers meanwhile registered only a modest rise in cost burdens that was the slowest since last November. Overall, composite data signalled a further marked rise in average input prices, albeit one that was the weakest in four months.
Reflective of the trend for input costs, composite output charges increased at a softer pace in February. Notably, the latest increase in overall output charges was the slowest seen since September 2016. Manufacturers raised their selling prices at a rate that, though solid, was the weakest recorded in five months. However, competitive market pressures limited the overall pricing power of services companies, which led prices charged for services to be little-changed from the previous month.
Optimism towards future activity growth remained strongly positive in February. While manufacturers reported the highest level of positive sentiment for 21 months, confidence in the service sector fell slightly from January’s 11-month high. At the composite level, sentiment towards the business outlook edged up to its highest since May 2015.
Inflation Returns to Japan Japan’s consumer prices rise for the first time in more than a year in January as higher global oil prices give Prime Minister Shinzo Abe and the Bank of Japan a helping hand in their campaign to overcome deflation.
The core consumer price index rose 0.1% from a year earlier in January after falling 0.2% in the previous month, according to data released Friday by the Ministry of Internal Affairs and Communications. The rise was the first since December 2015. The core index excludes fresh food but includes energy. (…)
The core CPI for the Tokyo metropolitan area—which is less affected by gasoline costs than nationwide price data—fell 0.3% in February. (…)
The yield on the three-month bill closed at 0.668%, the highest since October 2008, and the yield on the six-month bill settled at 0.832%, the highest since November 2008. The two-year note’s yield settled at 1.322%, the highest since June 2009. The yield on the benchmark 10-year Treasury note closed at 2.498%, up from 2.317% at the end of last week, which was the lowest since November. (…)
Skeptical Strategists Undone by Wall Street Rally The S&P 500 has already surged above Wall Street strategists’ original year-end target.
(…) Stifel Nicolaus’s Barry Bannister recently boosted his target to 2400 from 2300. Ms. Subramanian earlier this week raised her year-end forecast to 2450 from 2300. The most bullish is Deutsche Bank’s Binky Chadha, who is looking for the S&P 500 to finish the year at 2600. (…)
The bullish headlines are everywhere.
Source: @jessefelder (Via The Daily Shot)
- Are US small caps massively overvalued? Here is the ratio of enterprise value to earnings. This has to be making Fed officials a bit uncomfortable.
Source: @credittrader (Via The Daily Shot)