Still traveling, although “stuck” in Jasper Alberta because of the BC forest fires. There is no better place to get stuck than Jasper Park Lodge.
Home Sales Tumbled In July for the Longest Slump Since 2013 ‘Too many would-be buyers are either being priced out or are deciding to postpone their search’
Existing-home sales fell 0.7% in July from June to a seasonally adjusted annual rate of 5.34 million units, the National Association of Realtors said Wednesday. That marked the fourth straight month of declines.
Compared with a year earlier, sales in July were down 1.5%. (…)
A shortage of homes on the market has fueled the sharp rise in prices, which rose 4.5% in July from a year earlier to a median price of $269,600. Average hourly wages, by comparison, were up just 2.7%. (…)
The average interest rate on a 30-year fixed-rate mortgage in July was 4.53%, up from 4.03% in January and 3.97% in July 2017, according to Freddie Mac. (…)
Fed Signals Rate Increase Next Month
Global liquidity is drying up
(…) Since January, the number of rate hikes globally has increased quite a bit. According to a six-month rolling sum of global central bank rate hikes compiled by Bank of America Merrill Lynch, we’re nearing pre-Lehman levels:
Given this tightening — much of which traces back to emerging markets trying to stem currency tremors or manage inflationary pressures — global liquidity has contracted quite substantially.
Using an indicator that tracks the broad money supply of the top 30 major economies converted into dollars relative to US M2 money supply, Neels Heneke and Mehul Daya at Nedbank find that the supply of dollars has become increasingly scarce. This is thanks in part to a stronger US dollar and economy, slowing credit growth in China, protectionism and explicit moves from the Fed and Treasury to remove money from the financial system:
US liquidity matters most because the greenback serves as the world’s reserve currency and most foreign debt is dollar-denominated. Global central banks prefer holding dollars than any other currency by a large margin, and over $4.4trn worth of trades involve the dollar daily. (…)
(…) here’s Redeker again in a recent note on what happens after quantitative tightening (QT) picks up:
October will likely see the Fed’s QT pace reach US$600bn/yr; headwinds for US capital markets will inevitably increase. Continued EM selling pressure provides US markets with temporary liquidity inflows, but this suggests EM growth slowing down even faster, dampening US corporate profitability and eventually growth, too. Slowing liquidity inflows, faster Fed QT, and a weaker corporate outlook suggest US risk assets peaking.
FLASH PMIs
U.S. private sector output growth loses momentum in August
- Flash U.S. Composite Output Index at 55.0 (55.7 in July). 4-month low.
- Flash U.S. Services Business Activity Index at 55.2 (56.0 in July). 4-month low.
- Flash U.S. Manufacturing PMI at 54.5 (55.3 in July). 9-month low.
- Flash U.S. Manufacturing Output Index at 54.3 (54.5 in July). 11-month low.
(…) Payroll numbers meanwhile increased at the slowest pace since June 2017. (…)
Staffing levels increased at the softest pace for over one year in August. Survey respondents noted that more cautious hiring strategies largely reflected the need to reduce operating expenses at their business units. Latest data revealed another sharp rise in input costs at private sector companies, although the rate of inflation moderated to a seven-month low. Reports from panel members continued to cite higher prices for steel-intensive items, alongside renewed pressure to boost staff wages. (…)
The PMI is indicative of the economy growing at an annualised rate of roughly 2.5%, down from a 3.0% indicated rate in July.
Output, new orders and employment growth all moderated, adding to signs that the economy has cooled after strong growth in the second quarter. Backlogs of uncompleted work, a key indicator of future output and hiring, meanwhile fell for the first time for over a year, suggesting the slowing trend could persist into the fall. (…)
Eurozone PMI signals steady expansion in August but optimism hits two-year low
- Flash Eurozone PMI Composite Output Index at 54.4 (54.3 in July). 2-month high.
- Flash Eurozone Services PMI Activity Index at 54.4 (54.2 in July). 2-month high.
- Flash Eurozone Manufacturing PMI Output Index at 54.5 (54.4 in July). 3-month high.
- Flash Eurozone Manufacturing PMI at 54.6 (55.1 in July). 21-month low.
(…) Although growth rates improved slightly in manufacturing and services, both remained among the weakest seen for at least one-and-a-half years.
Similarly, new order growth picked up marginally in both sectors but, measured overall, was nevertheless the third-weakest since December 2016. A particularly sluggish performance was seen in manufacturing, where new export orders registered the smallest monthly rise for two years. (…)
Japan’s goods-producing sector continues to grow at relatively soft pace
- Japan Flash Manufacturing PMI increases slightly to 52.5 in August, from 52.3 in July.
- Input and output price inflation at multi-year highs.
- Overall demand improves, but export orders fail to rise for a third straight month.
China, U.S. Fire Off New Tariffs in Middle of Trade Talks The restarted negotiations involve lower-level officials—both sides have played down hopes for major progress in this round of talks
Just after the U.S. Customs and Border Protection order went into effect at 12:01 a.m. Thursday, China’s Commerce Ministry announced the imposition of retaliatory measures. The tit-for-tat 25% duties cover Chinese-made chemicals, machinery, tractor parts and U.S.-produced fishmeal, industrial lubricants, engines and trucks, among other goods. (…)
Nafta Talks Near Accord on Key Points, Mexican Official Says
(…) After Wednesday’s talks ended, Jesus Seade, the incoming trade negotiator for Mexican President-elect Andrés Manuel López Obrador, said he was “optimistic” of reaching a deal on Nafta but that it was premature to specify the timing. He said “it could be that we finish everything between the U.S. and Mexico this week.” Talks are set to resume on Thursday.
Trade negotiators from both countries want to sort out bilateral trade issues in the treaty before Canadian negotiators rejoin talks, possibly in coming days. (…)
Cohen, Manafort and Midterms
Interesting points from Karl Rove:
(…) So what’s the likely political fallout from these courtroom bombshells? (…)
Following Tuesday’s verdict, the president declared that special counsel Robert Mueller’s successful prosecution of Mr. Manafort “has nothing to do with Russian collusion.” Mr. Trump is right—for now. Only the final special-counsel report will settle that definitively. Still, there’s reason to be skeptical of the collusion narrative. Every presidential campaign leaks, and the Trump campaign leaked more than any in history. If there had been collusion, the public would likely know about it by now. (…)
Mr. Cohen’s guilty pleas are more troubling for Mr. Trump, and not simply because Mr. Cohen admitted to paying hush money to Stormy Daniels and Karen McDougal, who claim to have had affairs with Mr. Trump. Mr. Cohen now says Mr. Trump directed him to make the payments to protect his election prospects, an action some believe constitutes a violation of campaign-finance laws.
But many legal analysts doubt the payments were illegal, including Bob Bauer, former White House counsel to President Obama and legal adviser to Mr. Obama’s campaigns. In an article last month, Mr. Bauer suggested that “the question for legal purposes is whether Trump would have made this payment even if he had not been a candidate.” The president, he believes, “does not have to deny that politics played some part in his and Cohen’s plotting.” Rather, Mr. Bauer argues that Mr. Trump’s desire to protect his personal reputation complicates the campaign-finance question: “A dual motive is enough to muddy the legal waters.” Unable to prove the payments were made solely for a political purpose, it is unlikely that prosecutors will proceed with charges.
Still, Tuesday’s events will bring significant damage. Messrs. Manafort’s and Cohen’s legal troubles will further cement in the public’s mind that corrupt people weaseled their way into Mr. Trump’s orbit before and during his presidential campaign. This notion will be reinforced further when Mr. Manafort’s next trial begins in September, over charges of money laundering, failing to register as a foreign agent, and lying to federal agents.
The events will also strengthen congressional Democrats’ argument that their party is a necessary check on the president. Yet while Democrats have the advantage now, they could easily overplay their hand and turn off swing voters who don’t want America plunged into a political circus like the one Republicans created by impeaching Bill Clinton in 1998.
Given Justice Department guidelines, Mr. Mueller—in contrast to James Comey —is unlikely to act in ways that affect the election once September begins. The president may still choose to lash out at the special-counsel investigation, but that would hurt him and his party. Rather than attacking the Mueller probe, Mr. Trump’s best approach would be to focus on his agenda. That would be a better strategy than reviving Tuesday’s sordid drama.
EARNINGS WATCH
Almost done. 476 reports in, 80% beat rate wit a +5.2% surprise factor. Q2 EPS up 24.7% (21.7% ex-Energy) with an amazing 9.4% revenue growth rate (8.3% ex-E).
Q3e: +22.4%. Q4e: +20.2%.
Aramco IPO halted, oil giant disbands advisers – sources
Rumour is that Elon Musk will soon tweet that he is mulling buying Aramco and merge it with Tesla. 