As I have been saying for a while US economic data continues to disappoint and drag markets lower. Germany remains to be lone bright spot in the world.
DAX is down 4% MTD versus -7.25% for Nikkei.
Despite poor economic data USD has strengthened against every currency except JPY and CHF this month.
I believe the next wave of poor news will be from Europe. I think by sometime late next year Euro and GBP would be much weaker versus USD.
I need to look into the effects of US Fed QE on the asset market. I think more QE is inevitable later this year.
It is hard for me to see what would push the market higher. We have been in a relentlessly falling market since May with a brief respite in July from surprisingly good earnings season. Macro backdrop has been poor all along. The market staged a comeback toward the end but this gives me no comfort.
On the bright side, Chinese commodity import remained extremely strong in July. Industrial metals were especially strong – refined lead import jumped 80% from June while zinc and nicked surged over 50% each MoM (MoM = month over month) Refined copper imports grew to 2,24,700 tons supported by tight scrap market and favorable domestic/LME price spread
Among precious metals, palladium imports jumped back up towards levels seen in the first quarter and even if vehicle sales slow, palladium demand should find support from the implementation of tighter emission legislation, it added.
Agricultural imports were EXTREMELY STRONG (I will do a quick write up on it and send out to sales tomorrow)
In case of agriculture, corn and sugar imports surged, with corn imports rising to a record high and net imports three times that of June levels.
Sugar imports reached all-time high having expanded by 130 per cent year-on-year. However, soybean imports eased to 4.95 Mt from previous months' record 6.2 Mt. Cotton imports too were lower for the third consecutive month yet imports year to date of 1.7 Mt are still double the 2009 levels.
Japan exports remain strong but is easing off
• Exports down 1.4% MoM and imports down 3.5% MoM.
• Would be curious to see when the impact of strong Yen would be reflected in trade figures.
• Not surprising given worldwide GDO growth being adjusted.
Germany seems to be the only source positive economic surprise - German Ifo index posts surprise August increase
• The index, produced from surveys conducted by the Munich-based Ifo Institute, rose to 106.7 in August, up from a reading of 106.2 in July. Economists had forecast the index to slip to 106.0.
• Economists have cautioned that the pace of German growth, which was driven in large part by exports as world trade activity rebounded sharply on strong demand from China and other emerging markets, would likely moderate in coming months as world growth slows.
• Still, Germany appears to be the only place in the world where growth is still in acceleration phase.
US manufacturing momentum has now officially collapsed
• Headline number increased by a meager 0.3% MoM but much of that was due to a massive surge in aircraft orders for Boeing following a successful air show. However, these orders will take a number of years to deliver if they don’t get canceled in the mean time.
• Manufacturing was basically the only bright spot in US economy and now it seems to have gone lights out.
US housing market in a total landslide
• The fact that US new home sales fell by 12.4% MoM to a new record low in July is arguably even graver news than the 27% MoM decline in existing sales reported yesterday.
• But it’s hard for me to understand how anyone would expect a rebound in housing when jobless claims are creeping back up. The fact is there are simply way too many homes for sale and consumer confidence remains at a rock bottom level.
Tomorrow:
Australia private Capex
Singapore industrial production
Spain Q2 final GDP
***USA initial jobless claims ***
US Kansas City Fed survey
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