INFLATION WATCH
CPI for all items rises 0.1% in June as shelter, gasoline, food indexes increase In June, the Consumer Price Index for All Urban Consumers increased 0.1 percent seasonally adjusted; rising 2.9 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy rose 0.2 percent in June (SA); up 2.3 percent over the year (NSA).
U.S. Producer Prices Rose in June Trucking freight prices helped drive overall costs higher
The producer-price index, a measure of the prices businesses receive for their goods and services, rose a seasonally adjusted 0.3% in June from a month earlier, the Labor Department said Wednesday. When excluding the often-volatile food and energy categories, prices were also up 0.3% in June from the prior month. Prices excluding food, energy and trade services increased 0.3% on the month, as well. (…)
From a year earlier, overall prices climbed 3.4% in June, the largest annual rise since November 2011. Prices excluding food and energy increased 2.8%. Prices excluding food, energy and trade services were up 2.7%. (…)
See a trend?
Average Gas Price Nears $3 a Gallon, Raising Worries for U.S. Economy The highest retail gasoline prices in years are the latest development to raise concerns about one of the longest-running U.S. economic expansions on record.
-
IEA Warns Outages May Stretch Oil-Output Cushion to the Limit Global oil outages may push spare production capacity to the limit, a top energy body warned, hinting it would be ready to tap its emergency supplies if needed.
-
Metals Slide Deepens as Trade Fears Escalate
Slowdown in Home Sales Spreads to Brooklyn and Queens Brokers say weakness reflects buyer caution about the potential impact of federal tax laws
A slowdown in residential sales that began among superluxury Manhattan condos has spread to less expensive neighborhoods in Brooklyn, Queens and Westchester and other suburban New York counties.
The weakness reflects caution among buyers about the potential impact of federal tax laws that limit the benefits of home ownership, brokers said, as well as the rebellion of some buyers against high asking prices that built up over several years of stronger sales. (…)
TRADE
This Time Around, Chinese Consumer Products Would Face Tariffs The Trump administration is expanding the battlefield in its trade fight with China into consumer products for the first time, illustrating how dependent the vast U.S. consumer economy is on Chinese imports.
The $200 billion in products under consideration for a new 10% duty includes bicycles, sound systems, refrigerators, pocketbooks, vacuum cleaners, cosmetics, tools and seafood.
“They’re not only hitting consumers’ wallets, they’re literally hitting wallets,†said Jonathan Gold, vice president at the National Retail Federation, whose members rely heavily on low-cost Chinese products. He was referring to the inclusion on the tariff list of “travel goods,†a category that includes wallets as well as luggage. The American Apparel & Footwear Association estimates that over 80% of that $31 billion sector comes from China.
China’s Commerce Ministry said Wednesday the country “has no choice but to take necessary countermeasures.†China doesn’t import enough from the U.S. to match Washington dollar for dollar with tariffs as it has in previous rounds, so Beijing is reviewing plans to hit back in other ways, said Chinese officials familiar with the discussions.
Measures are likely to include holding up licenses for U.S. companies, delaying approval of mergers and acquisitions involving U.S. businesses and ramping up inspections of American products at China’s borders, the officials said. (…)
A senior administration official said in unveiling the list Tuesday night that “we did try to take into account the potential impact on consumers.†He added that the goal wasn’t to raise the price of imports but “to encourage China to change its behavior.†(…)
Those tariffs wouldn’t be imposed until after public hearings scheduled for late August.
Mr. Trump has said he is willing to impose tariffs on yet another $200 billion of Chinese imports if Beijing retaliates again—which would mean the vast majority of what the U.S. buys from China would be hit by duties. China sent $523.7 billion in products to the U.S. last year. (…)
Even under the new tariff list, the biggest categories of Chinese consumer-product imports have been spared. The list doesn’t mention smartphones such as iPhones or televisions. Finished shoes and clothing aren’t included—about 70% of the U.S. footwear market is made up of Chinese imports. Neither are pharmaceuticals or medical devices. (…)
(…) U.S. businesses will pay a price: Home furnishing retailers are expected to be hit particularly hard because China supplies 65 percent of U.S. furniture imports, according to analysts at Goldman Sachs Group Inc. Stocks of auto parts retailers, which would also be affected by the latest tariff threats the U.S. lobbed at China, fell more steeply than the broader market, reports Reuters. (…)
(…) For now, neither economy is in the danger zone, meaning the escalation of trade tensions will likely continue in the short-term.
The climate, though, is poised to change in both economies, whether or not Mr. Trump and Mr. Xi know it. Whichever country finds the temperature getting unbearable first, will likely be the first to crack in a trade war.
China, U.S. Hint at Chance for Talks After Trump’s Tariff Threat
(…) After the U.S. unveiled a list of Chinese imports worth $200 billion that could face higher duties, China’s Vice Minister of Commerce Wang Shouwen said “when we have a trade problem, we should talk about it.†While that came amid fresh threats of retaliation from Beijing, it matches some willingness from the Trump team to resume talks at a high level, according to a person familiar with the administration’s thinking. (…)
“We should sit down and try to find a solution to this trade problem,†Wang said in an interview with Bloomberg in Geneva on Wednesday. (…)
White House spokeswoman Lindsay Walters said U.S. officials have had high-level talks with Chinese officials on “multiple occasions in the past few months†and have made clear U.S. concerns about the country’s trade practices. “The Trump Administration remains open to further discussions with China, but it is important that China finally address the longstanding concerns that have been repeatedly raised,†she said. (…)
“If one party does not honor its words, talks cannot succeed,†Wang said. For negotiations to succeed, “no party should point a gun at the other party,†he said.
Tensions within the Trump administration over trade are also complicating matters, according to two people familiar with the matter. As the de facto spokesman on economic matters within the cabinet, U.S. Treasury Secretary Steven Mnuchin took the lead early in the negotiations. But at different points in the talks, other more hawkish members of the administration have taken the helm, such as Commerce Secretary Wilbur Ross, which has confused the Chinese. (…)
BTW:
Chinese trade data may reveal a slowdown in exports in June, implying the U.S.-China trade skirmish may be starting to dent actual export demand. The sentiment measured by the Caixin Purchasing Managers’ Index of manufacturing new export orders had dropped below 50 for three months as of June. The historical relationship between the PMI sub-index for new export orders and actual export growth indicates the potential for a sharp slowdown from around 10% growth to no growth at all. A reading that shows exports remained resilient in June may be welcomed by investors. (Charles Schwab, Bloomberg data as of 7/8/2018)
Ford Sales Plummet in China, and New Tariff Hit Is Yet to Come Ford Motor sales in China plunged 26% in the first half of 2018 compared with the same period last year, and there is little relief in sight as U.S.-China trade tensions worsen.
China’s auto market overall grew 5.6% in the first six months, with sales reaching 14.1 million vehicles, according to figures released Wednesday by the government-backed China Association of Automobile Manufacturers. (…)
Ford and GM build most of their cars for the Chinese market through joint ventures with domestic partners, thus avoiding tariffs. But Ford exported nearly 65,000 Lincolns to China last year, along with nearly 19,000 Ford models including Explorer sport-utility vehicles.
Ford has said it doesn’t plan to raise prices for now, sacrificing margins on imported Lincoln and Ford vehicles instead. (…)
Europe Sees Trade Tensions With U.S. Eating Into Economic Growth
Gross domestic product in the 19-member eurozone is set to grow 2.1% this year, the EU said in its quarterly report, cutting its 2.3% forecast from May. The rate is expected to ease to 2.0% in 2019, in line with previous expectations. (…)
Coupled with White House threats to tax European cars and Italy’s pledge to challenge eurozone rules, the currency bloc faces “significant downside risk†after last year’s 2.4% GDP growth—the fastest pace in a decade. (…)
Beijing Lets Yuan Weaken by Most in 18 Months China guided the yuan to its largest one-day drop against the U.S. dollar in a year and a half, with an intensifying trade conflict between the world’s two largest economies putting fresh pressure on the Chinese currency.
Pfizer to Roll Back Price Increases After Trump Criticism
(…) “The company will return these prices to their pre-July 1 levels as soon as technically possible,†Pfizer said in a statement. It said the restored levels will remain in effect until the president had a chance to put or the end of the year, whichever is earlier.
The statement quoted Mr. Read offering support for Mr. Trump. “Pfizer shares the President’s concern for patients and commitment to providing affordable access to the medicines they need,†he said. (…)
Bank of Canada Raises Rates [25 bps to 1,5%], Keeps Hiking Path Amid Trade Row
Bank of Canada hikes interest rates; says trade hit likely to be bigger than earlier forecast
BlackRock Predicts One-and-Done Rate Hike for Bank of Canada
EARNINGS WATCH
STOXX 600 EARNINGS
From Thomson Reuters:
- Second quarter earnings are expected to increase 8.1% from Q2 2017. Excluding the Energy sector, earnings are expected to increase 2.9%.
- Second quarter revenue is expected to increase 5.9% from Q2 2017. Excluding the Energy sector, revenues are expected to increase 1.1%.
Delta cuts 2018 forecast on higher fuel costs, profit beats estimates Delta Air Lines Inc slashed its full-year earnings forecast on Thursday as fuel costs in the second quarter surged 38.8 percent and the company said it expected $2 billion spike in its fuel bill in 2018.
Source: WSJ.com, h/t Paul Menestrier; Read full article
SENTIMENT WATCH
Dark turn in ETF flows shows second half could be wild ride
FYI:
For once, Im 100% qualified to talk about current news
#ThaiCaveRescue Hi I’m Puff & I’m a cave/cavern/tech/Nitrox/tri mix/wreck cert’d diver. Summer 01, I worked at a dive equipment manufacturer and was part of the only team in all central FL Buckle up, we’re talking rescue 1/X
https://twitter.com/Where_is_Puff/status/1016112164418015232