Volvo Says North America Truck Market Peaks as Orders Drop
Volvo AB, the second-biggest truckmaker, said the U.S. heavy-vehicle market has probably peaked after orders declined.
Volvo’s second-quarter orders for trucks in North America dropped 19 percent to 10,528 vehicles, hurt by a 50 percent plunge at the Mack brand and less demand from the U.S. energy industry, the Gothenburg, Sweden-based company said Friday in a statement.
Even though the trucking biz remains strong:
The Cass Truckload Linehaul Index, which measures changes in base linehaul rates, rose 3.6% year over year in June, on top of a 5.2% increase in June of 2014. With demand improving and capacity remaining extraordinarily tight, we expect contract rate increases will continue to filter into our index at higher levels.
In its monthly investor report, Avondale Partners stated, “We would point out that contract pricing (which applies to 95+% of the public carriers’ freight) has been accelerating after a drawn-out bid season last year. As a result, although spot market pricing has decelerated, we are not surprised to see our index continue to post mid-to-high single digit gains and we expect this to continue. We see TL pricing increasing between 4% and 9% in 2015, depending on how much rate [increase] each carrier was successful in obtaining in 2014 and when those rate increases were achieved.”
U.S. Home-Builder Confidence Hits Highest Level in Nearly a Decade
An index of builder confidence in the market for new single-family homes stood at a seasonally adjusted level of 60 in July, the National Association of Home Builders said Thursday. A reading over 50 means most builders generally see conditions as positive.
June’s reading was revised up one point to 60, marking two straight months that the index has been at its highest point in more than nine years.
In the recovery, home builders’ positive sentiment hasn’t been matched by increased construction activity. One explanation for the optimism: since the housing crisis wiped out a number of builders, those left standing are feeling good about what’s next.
Thursday’s report showed the current-sales component of the index rose to 66 this month from 65 in June. Expectations for sales over the next six month rose to 71 from 69. A measure of traffic from prospective buyers fell to 43 from 44.
The builders’ gauge rose in three of the four regions of the country in July from the prior month. Confidence only slipped in the South, by one point.
This Haver Analytics chart illustrates the only objective measure in the NAHB survey:
How China’s Slowdown Is Worse Than You Think When GDP is unadjusted for price changes, growth is running 2 percentage points weaker than last year
One reason being touted to explain the gap is that China miscalculates the so-called GDP deflator, a broad measure of prices in the economy.
Capital Economics Ltd. argues that China’s GDP deflator is underestimated in periods when import prices are falling less than producer prices, hence the boost to real GDP.
In other words, China isn’t netting out the changes in import prices when measuring overall price changes in the economy.
EARNINGS WATCH
- 54 companies (19.5% of the S&P 500’s market cap) have reported. Earnings are beating by 5.6% (5.3% yesterday) while revenues have met expectations.
- The beat rate is 67% (68%). Ex-Financials: 76% (72%).
- Expectations are for a decline in revenue, earnings, and EPS of -3.8%, -2.8%, and -1.4%. These would be +1.7%, +1.9% (+1.8%), and +3.4% (+3.2%), on a trend basis (ex-Energy and the big-5 banks). This excludes the likelihood of beats, which have been above 4% over the past three years.
OIL
From SLB’s earnings release: management’s outlook in the press release calls for lower E&P spending in both North America (down >35% vs. >30% previously) and Internationally (down <15% vs. 15% previously). SLB continues to expect a tighter oil supply/demand balance, implying a higher oil price, but noted limited visibility. Management believes that the North American rig count may be at the bottom and that a slow increase could occur in the second half of the year.
CHINA’S WHATEVER IT TAKES
China banks lent $209bn for stock rescue Scale of official support casts doubt on equities rebound
China’s biggest state-owned banks have lent a combined Rmb1.3tn ($209bn) to the country’s margin finance agency in recent weeks to staunch a freefall in the stock market, casting doubt on whether the recent equities rebound is sustainable without government support.
(…) the latest revelations indicate that state support for the stock market is much larger than previously disclosed. (…)
In total, 17 banks provided interbank loans worth about Rmb1.3tn through July 13, the magazine reported.
The People’s Bank of China had previously said it was “actively assisting” CSF to obtain liquidity through interbank lending, bond issuance and other methods. The central bank later confirmed it had provided loans directly to CSF, without specifying an amount.
CSF also recently issued bonds worth Rmb800bn in the interbank market, where commercial banks are the biggest investors. Combined with the loans, that brings CSF’s total war chest to over Rmb2tn even without including direct loans from the central bank.
The Caijing report suggests the PBoC is seeking to minimise its direct role in lending to CSF, preferring to rely on commercial banks to provide funds for the stock market rescue. (…)
Bloomberg counts differently:
China Unleashes $483 Billion Margin Trader to Stem Stock Rout
China has created what amounts to a state-run margin trader with $483 billion of firepower, its latest effort to end a stock-market rout that threatens to drag down economic growth and erode confidence in President Xi Jinping’s government.
China Securities Finance Corp. can access as much as 3 trillion yuan of borrowed funds from sources including the central bank and commercial lenders, according to people familiar with the matter. (…)
While it’s unclear how much CSF will ultimately deploy into China’s $6.6 trillion equity market, the financing is up to 25 times bigger than the market support fund started by Chinese brokerages earlier this month. That’s probably enough to restore confidence among China’s 90 million individual investors, says Bocom International Holdings Co.
Why Falling Food Prices Around the World Aren’t Helping U.S. Consumers
As world food prices reach an almost six-year low, don’t expect American consumers to reap the benefits at restaurants or grocery stores anytime soon. Costs for meat, dairy, cereals, oils and sugar fell a combined 0.9 percent in June from the previous month, reaching the lowest level since September 2009 and down 21 percent from this time last year, according to data released last week by the United Nations Food and Agriculture Organization. Meanwhile, consumer food prices in the U.S. are increasing faster than for other goods and services, with year-over-year advances averaging 2.4 percent since the start of 2015. That compares with either flat or negative readings for prices overall. Read the full story here.