Friday, June 28, 2013

Markets waffle on slower economic activity in the US

Dow fell 40, decliners over advancers 3-2 & NAZ went up 4.  The MLP index was up fractionally in the 456s & the REIT index lost a fraction to the 278s.  Junk bond funds were mixed to lower & Treasuries back off after buying.earlier this week.  Oil rose for a 5th day, its longest increase since Apr, on that signs of economic recovery in the US & Germany will support fuel consumption.  Gold traders are divided on the outlook for prices, with some judging that the slump to a 34-month low following Federal Reserve comments on tapering stimulus will spur demand for coins & jewelry.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13....95.64 Up .....0.03 (0.0%)

GCN13.CMX...Gold Jul 13.........1,187.10 Down ...24.30  (2.0)

German Retail Sales Beat Estimates in May Amid Signs of Recovery

Photo:   Bloomberg

May retail sales in Germany rose more than forecast, adding to signs that a recovery in Europe's largest economy has gathered pace amid record-low interest rates, while inflation accelerated.  Sales adjusted for inflation & seasonal swings climbed 0.8% from Apr, when they fell 0.1%, less than originally estimated, the Federal Statistics Office in Wiesbaden said.  Economists had predicted an increase of 0.4%.  Meanwhile the consumer price index rose more than forecast, climbing 1.9% this month.  Unemployment unexpectedly declined in Jun, business confidence climbed & ZEW’s investor sentiment index increased.  Chancellor Merkel warned this week that the EU must improve competitiveness rather than print more money.  The Bundesbank said this month that German GDP should have improved “markedly” in Q2, while warning of a potential slowdown in coming months.  It expects growth of 0.3% this year & 1.5% in 2014.

German Retail Sales Rise Amid Signs of Recovery: Economy

Chicago Business Activity Fell to 51.6 in June From 58.7

Photo:   Bloomberg

US business activity cooled more than projected in Jun, a regional report showed, as fiscal constraints & stagnant export markets buffeted manufacturers.  The MNI Chicago Report’s business barometer dropped to 51.6 this month from 58.7 in May, which was the highest in more than a year.  A reading of 50 is the dividing line between expansion & contraction. The forecast called for 55.  The Chicago index has been out of synch with other regional factory reports, surging in May when others pointed to a slump, & dropping this month as measures from the Federal Reserve Banks of New York & Philadelphia point to a rebound. Manufacturing (12% of the economy) might be feeling the effects of federal gov spending cuts that went into effect in Mar.  A measure of new orders declined to 54.6 after reaching a 3-month high of 58.1.  Backlogs slumped to 38.4, the lowest level since Sep 2009 & the decrease from the prior month’s 53.1 was the biggest decrease since Mar 1974.  A gauge of inventories improved to 41.4 from 40.4.  A measure of production decreased to 57 from 62.7, which was its highest reading since Mar 2012.  The employment measure climbed to 57.8, the highest since Jan, from 56.9, & the index of prices paid rose to 59.9 in Jun from 55.3 a month earlier. 

Business Activity in U.S. Cools More Than Forecast

China's central bank governor promised to ensure there is enough money in financial markets to maintain stability after a credit crunch sparked fears of a possible crisis.  In his first public appearance since the credit crunch, Zhou Xiaochuan said that financial markets have adequate liquidity for normal activity.  But he did not mention last week's abrupt spike in interest rates but promised to ensure adequate credit.  Interest rates paid by banks to borrow from other banks jumped last week from their normal level of 2-3% to a record 13.4% when demand for loans outstripped supply & the central bank did not intervene to provide extra funds.  "We will use various tools and instruments and make timely adjustment of market liquidity to maintain the overall stability of markets," Zhou said.  The rate spike triggered a tumble Mon in Chinese stock prices on fears the country might face a credit crisis but markets later recovered most of their losses.

Stocks are wandering on the last day of trading in Q2.  With all the ups & downs recently, Dow is finishing Q2, up 450.  That's not too bad all considered.  But economic fundamentals remain mixed at best.  US GDP growth will be drab again with signs that higher taxes & federal budget cuts are pinching.  Europe is nothing to write home about & China is trying to explain that the economy will slow further.  All this spells increased uncertainty, something stock markets don't like.

Dow Jones Industrials

stock chart

No comments: