China comes out with less than cheerful numbers in manufacturing and consumption while US shows more weakness. With economists cutting growth forecasts everywhere it is leading to a large selloff all across.
US 10yr bond auction today showed very strong demand. In sovereign bond market really the only thing that matters is economic and inflation (very closely linked) outlook.
Chinese government has actively tried to slow down economy and it’s working out just as planned. It’s a good thing. But in the short term the market just want more and more growth at whatever the long term consequence.
I think economic data will continue to disappoint. So far UK and Europe manage to sidestep this for couple months but it won’t be long before investors wake up to the fact that Europe is an utter mess.
I am really not positive on anything except gold for remainder of the year. And I think US 10yr yield goes to 2.5%. Strength in bund will continue as well.
I think we should look to go long USD - probably versus Euro and GBP. US economy has been overly criticized.
US trade deficit widens – US cannot rely on exports to grow its economy
• The U.S. trade deficit widened to near a two-year high in June, as imports from its largest trading partners ballooned.
• Price of oil played little role in skewing the deficit
• "This is spectacularly terrible," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. He expected the inflated deficit to shave up to half a percentage point off growth.
• U.S. exports contracted 1.3% to $150.45 billion, from $152.44 billion in May. Imports increased at a faster rate, expanding 3.1% to $200.35 billion from $194.42 billion.
China slowdown becoming more obvious – industrial production and retail sales both drop in July
• China’s drop in Industrial production in June was not one-off. We saw another drop in July : China's industrial production expanded 13.4% in July from a year earlier, slowing from June's 13.7% increase, government data showed Wednesday.
• Retail sales also dropped in July : Retail sales in July rose 17.9% from a year earlier, slowing from June's 18.3% increase.
• Meanwhile, inflation rose albeit not to a dangerous level and most of that rise was driven by food price.
UK unemployment rate falls but new jobless claims rise
• The employment rate (this is the % of people with jobs) in the UK rose 0.3% or 184,000 between the first and second quarters of this year, the largest quarterly increase since 1989.
• However, the number of new jobless claims is remaining higher than expected. Like US the initial jobless claims number is much more timely and is the better indicator of the direction of job market than employment rate.
• With huge cuts in public sector coming due to austerity this is not a positive sign.
China oil demand expected to grow strongly
• China's apparent crude oil demand will increase 11 percent this year, state media reported on Wednesday, citing a forecast from the China Petroleum and Chemical Industry Federation.
• Apparent demand for refined fuels would grow 6.7 percent while demand for natural gas would rise 11.4 percent from last year, the China Securities Journal reported.
China July copper output down on scrap, power shortages
• copper production by the world's top consumer China saw a monthly fall of 5.7 percent in July on scrap shortages and reduced power flows in the summer as smelters eye solid demand prospects for the rest of the year.
• Refined copper output is up 19 percent in the first seven months of the year, but if scrap shortages persist, the country is likely to see output level off further in the coming months with imports taking up slack.
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