BOOM?
(Bespoke)
U.S. Housing Starts Rebound in May Residential building permits—potentially signaling amount of construction is in the pipeline—fell 4.6%
Housing starts rose 5% in May from the prior month to a seasonally adjusted annual rate of 1.35 million, the Commerce Department said Tuesday. Compared with a year earlier, starts were up 20.3%.
The strong improvement was spread fairly evenly between single-family and multifamily, despite expectations that builders would pull back on new apartment construction given a flood of new units already hitting the market. Single-family construction increased 3.9% in May compared with a month earlier, while multifamily building increased 11.3%, according to the Commerce Department. (…)
Building permits, which tend to be a more reliable indicator and signal how much construction is in the pipeline, declined 4.6% to an annual pace of 1.301 million last month. Permit declines in the South and West drove May’s permits figure lower. Permits last month fell for both single-family and multifamily housing. (…)
Overall starts grew by 11% in the first five months of 2018 compared with the same period a year earlier. Multifamily starts rose 13.3% during that period, while single-family starts rose 9.8%.
Still, builders face headwinds in the coming months. Rising lumber prices have added nearly $9,000 to the cost of a new home since January 2017, according to the National Association of Home Builders, which reported on Monday that builder confidence ticked down slightly in June. (…)
Washington, D.C., Votes to Boost Wages for Waiters, Bartenders Voters in Washington, D.C., cleared the way for the city to more than quadruple the minimum wage for tipped workers to $15 an hour by 2025.
White House Sees Edge in China Talks President Donald Trump’s escalation of trade threats against China reflects his belief that Washington increasingly has the upper hand, administration officials said, adding he is prepared to withstand business pressure.
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Trump’s New Round of Tariffs Likely Will Hit Consumers Directly Many Chinese products imported by the U.S. are consumer goods, making it difficult to construct a list of $200 billion in extra items for tariffs without hitting consumers
(…) The nation’s leading import from China is cellphones. In 2017 Americans bought $70.4 billion worth of them from the world’s second largest economy. Also among top U.S. imports from China are computers, at $45.5 billion, various kinds of apparel, totaling $36.4 billion, toys and sporting goods, at $26.8 billion, and furniture at $20.7 billion. Shoes and televisions are also high on the list. (…)
Only about 1% of the first round of tariffs—which was detailed on June 15—included consumer goods, compared with about 52% for capital goods such as industrial machinery and 43% for intermediate goods like semiconductor components, according to calculations from Chad Bown, Euijin Jung and Zhiyao Lu at the Peterson Institute for International Economics. (…)
- Lloyd Blankfein says Trump’s threats are probably just a bargaining strategy. “I don’t think we’re in a suicide pact on this, so I suspect we’re not going to cause the economies to collapse,” he told Bloomberg Editor-in-Chief John Micklethwait in an interview. Paul Krugman wasn’t so sanguine, tweeting that he’s “amazed at the complacency of markets” given those threats.
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EU to hit U.S. imports in response to Trump tariffs European Union to charge import duties of 25 per cent on a range of U.S. products starting on Friday
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U.S. shale producers warn Chinese tariffs would hit energy exports China’s proposed tariffs on U.S. petroleum imports, part of a mounting trade war between the two countries, would crimp sales to the shale industry’s largest customer, adding new pressure on U.S. crude prices, energy executives and analysts said in interviews this week.
(…) China’s tariff threat caught U.S. producers off guard because it had been discussing buying more U.S. energy and agricultural products to reduce its $375 billion trade surplus with the United States. The levies could boost suppliers of West African crude at the expense of U.S. exports. (…)
In coal country, there are worries the trade war could harm exports, said Steve Roberts, president of the West Virginia Chamber of Commerce. “China is an enormously important trading partner,†he said. (…)
Meanwhile
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Soybean Prices Hit Lowest Point in Two Years
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Oil Falls as U.S.-China Dispute Threatens Trade
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Industrial Metals Slide on Reignited Trade Fears
- Also falling steeply: rubber (-30% since Jan.), cotton (-9% since May), iron ore (-20% since Feb.), wheat (-14% since May).
California, Eight States Ready Plan to Boost Zero-Emission Vehicles California and eight other states are preparing to roll out a plan pressuring car companies and others to meet ambitious goals for sales of electric vehicles and other environmentally friendly automobiles.
China Property Price Outlook
(…) The composite leading indicator incorporates money supply growth, government bond yields, swap rates, and property stock relative performance. The key point is despite some stabilization in the May property price data, the leading indicator is still pointing to a further softening in the Chinese property market. As the property market drives the broader macro/risk outlook for China (and commodities + EM), this is a key chart. Where it could be wrong would be if the seemingly over-confident consumer drove the market higher, and in Chinese asset markets we have plenty of case studies where “animal spirits” can surprise! So it’s a complex and evolving outlook, and one that I am spending a lot of time and focus on as a key driver for global markets this year and next.
Authers’ Note: Defensive play is out of favour
(…) The following chart, from Leuthold’s Jim Paulsen, shows the proportion of the S&P 500’s market cap made up by the prime “defensive” sectors of utilities, telecoms, pharmaceuticals and consumer staples:
(…) compositional changes have made the S&P 500 far less defensive than it used to be, even though it is perceived as a diversified investment.
How about that?
Cash is looking increasingly attractive relative to stocks. The spread between the S&P 500 dividend yield and the 1-month T-bill yield is approaching zero for the first time in a decade. (The Daily Shot)
Hmmm…
- US buyers of Treasuries no longer have foreigners or the Fed competing with them.
Source: The Daily Feather (via The Daily Shot)
Hmmm…
Jefferies’ leap in profits signals boost for Wall St Chief Rich Handler hails ‘excellent’ environment for investment banking
Jefferies on Tuesday flagged a solid second quarter for the big investment banks on Wall Street, reporting a 41 per cent jump in profits for the three months to the end of May.
The Madison Avenue-based investment bank said that net revenues for the period came to $823m, up 6 per cent from a year earlier, boosted in particular by a 42 per cent rise in revenues from investment banking, to $506m. Net income rose to $98m from $70m a year earlier, helped by a drop in the company’s tax rate in effect from 40 per cent to less than 20 per cent. (…)
The Tightening Hits Financials(…) One reason why banks are selling off is the prospect of significant layoffs and operating losses in the mortgage sector. Rising costs and tight production spreads have driven the mortgage industry into the red this quarter, with many shops not even meeting minimum production levels to achieve break even. Rob Chrisman warned in his weekly comment that he expects to see at least one large bank shedding “thousands†of people this summer because of the combination of tight spreads and the over $8,000 per loan cost of new residential originations.
Another, more important reason for fading on the US large cap financials, particularly given the extraordinary run last year, is that the easy growth for the industry is at an end, both in terms of loans and deposits. (…)
“Under QE Fed lent money to Treasury in the form of note and bond purchases,†Adler explains. “By redeeming the notes and bonds as they mature, the Fed is effectively calling in those loans at the pace of $30 billion per month now, going to $40 billion in July, and 50 in October. Treasury pays the Fed off with cash it raises in additional note and bond sales. Investors bought the bonds with their bank deposits.” (…)
What Xiaomi’s Dropped Listing Says About Chinese Markets The saga to do with Xiaomi’s IPO homecoming has highlighted one peculiar, but rather crucial, feature of the Chinese stock market: It isn’t really a market.
(…) Initial public offerings, for example, almost always receive approval in China only if they value companies at no more than 23 times their historic earnings. This unwritten rule has encouraged investors to believe that buying into IPOs is a sure way to riches: Because of their suppressed valuations, newly floated stocks nearly always ‘pop’ in the first few days of trading. Since 2015, Chinese IPOs have on average been close to 3,000 times oversubscribed and delivered nearly 200% gains in their first 20 days of trading, according to Wind Information. (…)
But what if Chinese regulators also want to keep companies listing CDRs to that same valuation threshold—supposedly to ‘protect’ local investors? That is no good for a company like Xiaomi, a tech-related outfit that is hoping for a tech-like valuation. More broadly, what will happen when Alibaba and its ilk look to issue CDRs at home—will they be subject to similar valuation caps?
Chinese regulators appear to have failed to reconcile their desire for tech stocks to list at home with their urge to keep control of markets. (…)
GE Is Dropped From the Dow Industrials General Electric will drop out of the Dow Jones Industrial Average next week, a milestone in the decline of a firm that once ranked among the mightiest of U.S. blue-chips.
IBM’s Debating AI Is Here to Convince You That You’re Wrong
(…) International Business Machines Corp.’s Project Debater faced off in public for the first time Monday, taking on a crack two-person team of humans, which included the 2016 Israeli national debate champion. The robot held its own during two short debates, and at moments, showed more than a little flair. It even convinced people in the audience to change their minds. (…)
So many apps I can think of for that!