U.S. Import Prices Ease With Lower Oil Costs

Import prices declined 0.2% (+4.2% y/y) during March following a 0.4% February increase, revised from 0.2%. (…) These figures are not seasonally adjusted.

Petroleum import prices declined 3.6% (+52.1% y/y), the first monthly decline since November. Nonpetroleum import prices improved 0.2%. The y/y increase accelerated to 1.2%, the strongest twelve-month rise in five years. Industrial supplies & materials prices excluding petroleum strengthened 1.2% (7.8% y/y), strong for the fifth consecutive month. Nonauto consumer goods prices eased 0.2%, but the y/y decline lessened to -0.2%. Motor vehicle & parts prices remained unchanged, and they’ve been fairly steady for a year. Capital goods prices notched 0.1% higher (-0.6% y/y) after declining from 2013 through 2016. (…)

Ford first-quarter China sales slump more than one-fifth as tax cut rolled back Ford Motor Co said on Thursday that its China vehicle sales fell by 21 percent in the first quarter compared with a year ago, after a tax cut on small-engined vehicles was rolled back.

Ford trailed many of its competitors in China in the first quarter with Toyota Motor Corp (7203.T), Honda Motor Co Ltd (7267.T) and others disclosing sales increases and the automakers’ association reporting a 7 percent rise for overall sales. (…)

The purchase tax for small-engined cars climbed to 7.5 percent this year from 5 percent in 2016 after the government stepped in to stimulate slumping sales. The tax will rise to the normal 10 percent rate next year.

Ford said in a written statement that its sales of vehicles that do not benefit from the purchase tax incentive rose by double digits.

Chinese Exports Surge Most In 2 Years But Goldman Warns It Won’t Continue

Amid all the chaos of lunar new year adjustments, Chinese exports in March surged 16.4% YoY (-1.3% YoY in Feb) – the biggest jump since Feb 2015. Import growth fell back from February’s surge (but surprised to the upside). Furthermore, China’s trade surplus with the United States, another bone of contention for Trump, widened in March from February. (…)

• The End of China’s Export Juggernaut

IEA Forecasts Second Year of Slowing Oil Demand Growth

In its closely watched monthly oil market report, the IEA reduced its forecast for 2017 demand growth to 1.3 million barrels a day, warning that this outlook could still “prove optimistic.” (…)

OPEC’s oil production fell by 365,000 barrels a day in March, bringing the group’s adherence to its supply commitments to 99%, according to the IEA. Non-OPEC producers who agreed to participate in the market action also improved their compliance to 68% in March from a meager 38% the month before, the IEA said. (…)

But the IEA said the cuts so far had had a limited effect on massive levels of stored oil, which built up in 2015 and 2016 as traders bought cheap crude to sell later at higher prices. One of OPEC’s goals with its cuts is to drain storage to more manageable levels.

But the IEA said oil storage rose in the first three months of 2017 and began to fall in February in March.

The IEA also pointed to another drag on prices: Production in the U.S.

American producers are taking advantage of higher prices, increasing output to 9 million barrels a day in March from a trough of 8.6 million barrels a day last September, the IEA said. It said U.S. output would rise by 680,000 barrels a day by the end of the year compared with the end of 2016. Overall, non-OPEC output is expected to rise by 485,000 barrels a day this year. (…)

FYI: the U.S. Energy Information Administration reported U.S. producers boosted their output by 36,000 barrels a day last week, continuing a two-month string of weekly increases.

Here’s the big picture courtesy of The Daily Shot:

• Oil Stocks Rose in First Quarter Despite OPEC Cut, IEA Says

Trump Says Dollar ‘Getting Too Strong,’ Won’t Label China Currency Manipulator President Donald Trump said Wednesday the U.S. dollar “is getting too strong” and he would prefer the Federal Reserve keep interest rates low.

(…) “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting—that will hurt ultimately,” he added. “Look, there’s some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good.”

He continued, “It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.” (…)

“They’re not currency manipulators,” Mr. Trump said. (…)

Mr. Trump also made a full reversal from the campaign by stating his support for the U.S. Export-Import Bank. The president said he planned to fill two vacancies on the bank’s board, which has been effectively paralyzed with three open seats on its five-member board.

“It turns out that, first of all, lots of small companies are really helped, the vendor companies,” Mr. Trump said. “But also, maybe more important, other countries give [assistance]. When other countries give it we lose a tremendous amount of business.” (…)

“Instinctively, you would say, ‘Isn’t that a ridiculous thing,’ ” Mr. Trump said of the Ex-Im Bank. “But actually, it’s a very good thing. And it actually makes money, it could make a lot of money.”

Trump Prods China’s Xi on North Korea Threat President Donald Trump, in an interview with The Wall Street Journal, said he has offered Chinese President Xi Jinping a more favorable trade deal for Beijing in exchange for help on confronting the North Korean threat.

President Presses Democrats on Health-Bill Negotiations Almost three weeks after canceling a vote on his health-care package over GOP infighting and opposition from Democrats, Trump is threatening to withhold payments to insurers to force Democrats to the negotiating table.

In an interview in the Oval Office, Mr. Trump said he was still considering what to do about the payments approved by his Democratic predecessor, President Barack Obama, which some Republicans contend are unconstitutional. Their abrupt disappearance could trigger an insurance meltdown that causes the collapse of the 2010 health law, forcing lawmakers to return to a bruising debate over its future.

Mr. Trump remained so focused on the health-care debate that when The Wall Street Journal asked if he would agree to release guidelines for lawmakers to write tax legislation before a health-care deal was done, he said, simply, “No.”

“I’m going to get health care done,” he said.

Soon after, in a separate interview, Mr. Trump’s budget director, Mick Mulvaney, sounded a different note. (…)

Mr. Mulvaney said he expected the White House to complete its tax proposal in the next several weeks. He didn’t rule out the possibility of a tax bill passing before the congressional recess in August, though many White House officials and lawmakers believe that timeline is unrealistic.

Mr. Trump said he had mixed feelings about creating turmoil in the insurance markets.

“Obamacare is dead next month if it doesn’t get that money,” Mr. Trump said. “I haven’t made my viewpoint clear yet. I don’t want people to get hurt….What I think should happen and will happen is the Democrats will start calling me and negotiating.” (…)

House Speaker, Paul Ryan (R., Wis.) has said he would prefer to see the administration continue to fund the payments. (…)

Responding to Mr. Trump’s comments, Mr. Schumer said the president was “threatening to hold hostage health care for millions of Americans…to achieve a political goal of repeal that would take health care away from millions more. This cynical strategy will fail.” (…)

But he gave only tepid support to Mr. Bannon, referring to him as “a guy who works for me.” Mr. Trump described himself as his own “strategist.” (…)

A threat:

From SocGen via Valuewalk:

• Much more on this here.

Another threat:

The Coming Profit Squeeze Rising costs and weak profit growth at home will leave some companies with shrinking margins, which could further slow growth.

(…) The economy continues to grow slowly, with economists now estimating gross domestic product grew at just a 1.2% annual rate in the first quarter. Low inflation shows that companies still don’t have much pricing power. But a tightening job market is pushing labor costs higher, with last Friday’s jobs report showing the Labor Department’s measure of aggregate wages up 4.1% in March from a year earlier. It all adds up to increasing pressure on profit margins.

Indeed, one measure of margins within the U.S.—domestic after-tax profits as a share of gross value added at nonfinancial companies—began slipping over two years ago. That matters, argue economists at Cornerstone Macro, because when domestic profit margins roll over it is often a sign the economic expansion is getting old. To judge from where margins peaked during the past 10 cycles, the most recent peak would suggest that the expansion is about three-quarters of the way to its finish. That would suggest a recession around the third quarter of next year. (…)

There are things that could disrupt this story. If President Donald Trump and Congress can hammer out a corporate tax cut, for example, margins would at least temporarily improve, forestalling the squeeze. If economic growth picked up, revenue would too, so more money would fall to the bottom line. (…)

• Fear Is Creeping Back Into Markets

(…) The Credit Suisse Fear Barometer, which measures the cost of buying protection against declines in the S&P 500 Index, neared an all-time high this week. (…) Credit Suisse’s gauge jumped 46 percent this month through Tuesday, when it reached 45.74. That’s about a third of an index point away from its June 2016 peak ahead of the Brexit vote. The broader CBOE Volatility Index, known as the VIX, is up almost 30 percent this month. (…)

What’s more, the cost of hedging against a 5 percent decline in the S&P 500 Index over the next month has increased at the fastest rate since June’s Brexit referendum, relative to options betting on a gain of that magnitude. (…)

And the cost of hedging against declines in the Euro Stoxx 50 benchmark has risen to levels not seen since the U.K. referendum on European Union membership. Investors may be seeking to protect gains as the French election looms.

Lastly, a treat

From my old friend Terry.

Elvis introduces Unchained Melody which he recorded two weeks before the Vegas show. He died 2 months after.

http://www.flixxy.com/elvis-presley-unchained-melody-with-never-seen-before-intro.htm