Is China heading for a hard or soft landing? One chart to keep an eye on is the relative performance of materials equities, the long run of outperformance since 2000 looks like it might be rolling over.
Germany’s Ifo business sentiment index rose unexpectedly in March, moving in the opposite direction to the the PMI released last week:
Italian consumer morale also rose to 96.8, economists were expecting a slight decline to 93.7.
Yesterday’s much worse than expected PMI data from the euro zone has pushed the Citigroup economic surprise index for the region below zero.
Germany has been one of the strongest performing equity markets this year but is still in the middle of the pack compared to other European countries on valuation.
U.S. new home sales slipped 1.6 percent to a seasonally adjusted 313,000-unit annual rate. Economists polled by Reuters had forecast sales at a 325,000-unit rate in February.
The euro zone’s economy took an unexpected turn for the worse in March, hit by a sharp fall in French and German factory activity. The manufacturing purchasing managers indexes for France and Germany were both worse than even the most pessimistic expectations from economists polled by Reuters.
China’s HSBC manufacturing PMI also fell to 48.1, below 50 for a fifth straight month.
“Reflation trade”? Equities have been tracking the 5yr breakeven inflation rate derived from inflation-protected bonds.
Saudi Arabia has repeated publicly it would prime its pumps to meet any shortfall in exports from fellow OPEC member Iran, this chart shows their production since 1980:
Unwelcome news for British finance minister George Osborne ahead of today’s budget – February public sector borrowing comes in at £15.2bn against expectations for £8bn.
Along with the rise in bond yields, expectations for interest rates at end 2013 and 2014 have started to pick up:
U.S. February housing starts fall slightly to a 698,000 annual rate:
UK inflation edged down to 3.4% in February:
Spanish banks’ bad loans highest since August 1994
The NAHB U.S. homebuilder sentiment index held at 28, below economists’ expectations for 30.
Apple will initiate a regular quarterly dividend of $2.65 a share in July and will buy back up to $10 billion of its stock starting in fiscal 2013.
Energy leads the way for commodities this year, but with a big divergence between the components – gasoline sitting at the top while natural gas sits near the bottom.
China’s trade balance plunged $31.5 billion into the red in February as imports swamped exports. It followed reports on Friday that inflation cooled in February while retail sales and industrial output fell below forecast, all pointing to a gradual cooling.
Investors ploughed more money into hedge funds over the past month as performance has picked up after last year’s losses.
Final Q4 Italian GDP growth came in at -0.7%q/q. This chart showing GDP vs the Markit purchasing managers’ index shows the current recession may continue into this year.
It’s the economy, stupid. Or isn’t it?
Brent crude has risen 15 percent since the end of last year, focusing people’s minds on the potential this has to choke off the recovery in world growth. But some reckon it is the recovery that’s at least partly responsible for the surging oil prices — economic data from United States and Germany has been strong of late. There are hopes that France and the United Kingdom may escape recession after all. And growth in the developing world has been robust.
Geopolitics of course is playing a role as an increasing number of countries boycott Iranian oil and fret over a possible military strike by Israel on Iran’s nuclear installations. But Deutsche Bank analysts point out that world equity markets, an efficient real-time gauge of growth sentiment, have risen along with oil prices.
Their graphic (below) shows a remarkably close relationship between oil prices and the S&P 500. Click to enlarge
Where are the missing barrels of oil, asks Barclays Capital.
Oil inventories in the United States rose sharply last week, with demand for oil products such as gasoline at the lowest in 15 years and crude stockpiles at the highest since last September. Americans, pinched in the wallet, are clearly cutting back on fuel use.
But worldwide, the inventories picture is different – Barclays calculates in fact that oil stocks are around 50 million barrels below the seasonal average. And sustainable spare capacity in the market is less than 2 million barrels per day. What that means is that the world has “extremely limited buffers to absorb any one of the series of potential geopolitical mishaps.” (Barclays writes)
A big difference from the picture at the start of 2012. With the global economy weak, analysts predicted OPEC would need to pump 29.7 million barrels per day in the first quarter, more than a million barrels below what the group was actually pumping. Logic dictates inventories would have started to build.
Japanese people are generally regarded as saving a lot and not spending much, but in olden times when Tokyo was called Edo (until the mid-19th century), it was considered iki (chic or sophisticated) not to keep one’s earnings overnight.
The latest survey from the Central Council for Financial Services Information (part of the Bank of Japan) may suggest that people are going back to that tradition — although perhaps not for style reasons.
The survey, only available in Japanese so far, showed more than one in four households (consisting of at least two people) said they have no savings, the highest level since the survey started in 1963.
