Stocks are higher this morning as global stocks and commodities rally. Bonds and MBS are flat.
It seems like the big Brexit-related sell-off might be over. Brexit will have a negligible effect on US corporate earnings, and stocks will benefit from a lower, steadier interest rate environment. I would look for the correlation between US stocks and global stocks to break down gradually. I am not sure we will see the same effect in the Treasury markets as the global bond market is simply much more integrated. Speaking of which, global bond yields are holding steady this morning, with the German Bund at -11 basis points and the the PIIGS slightly lower.
First quarter GDP was revised to +1.1%. while personal consumption came in at 1.5% and the PCE index (the inflation measure preferred by the Fed came in at 0.4%). Housing as a percentage of GDP increased. I have long said the difference between this sub-par economy and a strong one is housing. Politicians have yet to figure this out.
Home prices rose .5% MOM and 5.4%YOY, according to the Case-Shiller home price index. Home prices in 7 MSAs (Denver, Dallas, Portland OR, San Francisco, Seattle, Charlotte, and Boston) have eclipsed their 2006 peaks.
Personal Incomes rose 0.2% in May, slightly below forecasts, while personal spending increased 0.4%, right in line with expectations. For the month, the PCE core index rose 1.6% YOY, which is still below the Fed’s target of 2%.
Mortgage Applications fell 2.6% last week as purchases fell 3% and refis fell 2.4%. Pending Home Sales fell 3.7% MOM in May and are up 2.4% YOY.
The Fed is scheduled to release the results of its stress tests for the largest US banks. The results should come out after the close. Billions of dollars in dividends and buybacks are on the line. Separately, GE’s systemic designation has been rescinded by US regulators. GE is the first institution to have the designation removed, which requires stringent capital and leverage requirements. GE has sold much of its GE Financial division, and has returned to its roots as an industrial manufacturer.
Speaking of banking crises, the European big banks have stabilized in the aftermath of Brexit. The canaries in the coal mine are Deutsche Bank and Unicredito. Even Barclay’s and RBS have stabilized. The thing to keep in mind is that the banks now have almost double the capital they had in 2008 and Brexit is nothing like the bursting of the US residential real estate bubble. The Bernank agrees.
Freddie Mac wonders if the homeownership rate can fall below 50%. The current level is at 63.5%, which is the lowest in 22 years, and just off the low of 63%, which goes back to 1965, when Census started tracking the statistic. They look at 3 studies, which all predict lower homeownership going forward. The factors inhibiting an increase in homeownership are lower income growth, high rental prices, tight supply and and high student loan debt / tight credit. It is hard to tell what a “normal” homeownership rate as the 2005 spike was the result of a bubble and a lot of social engineering via the housing market, which really started early in the Clinton Administration.
Filed under: Economy, Morning Report |
We all thought the financial market effect would be short lived. No surprise here.
LikeLiked by 1 person
Folks predicting Brexit apocalypse might be surprised.
LikeLike
@jnc4p: “But hey, glad to see you can still contribute at your level.”
damn, son.
LikeLike
I replied at the appropriate level of the remark that I was responding to.
The “Republitarians are idiots/frauds/racists, etc” spam is only slightly less tiresome than Cons sock puppet spam.
LikeLiked by 1 person
Interesting take on the purpose of America:
LikeLike
Hunh?
Is this some sort of collectivism by a different name?
LikeLike
They want a majority minority country to show that everyone can all get along and to repudiate the founding principle of the United States, white supremacy.
My view is that countries with evenly divided racial or sectarian mixes tend towards Yugoslavia or Lebanon in terms of their politics.
LikeLiked by 1 person
“… the founding principle of the United States, white supremacy.”
Huh? Strikes me as the first great debate, not a founding principle.
LikeLike
Ta-Nehisi Coates makes that argument pretty frequently and it is taken for granted on the SJW left.
“And if class-based policy alone is insufficient to banish racism in Europe, why would it prove to be sufficient in a country founded on white supremacy?”
http://www.theatlantic.com/politics/archive/2016/01/bernie-sanders-liberal-imagination/425022/
LikeLike
Who is T-N Coates and who cares what he thinks? Is he some left wing guru I have managed to avoid? I avoided Marcuse all the way through the 60s.
LikeLike
“discuss what the TV show The West Wing gets wrong (and right)”
what is it with liberals and that shitty TV show. If you want an real portray of official DC, watch Veep.
LikeLiked by 1 person
It is porn for progressives
LikeLiked by 1 person
Bingo.
LikeLiked by 1 person
http://www.gocomics.com/pricklycity/2016/06/28#mutable_1457963
maybe someone else can figure out how to post the image.
LikeLike
Excellent explanation of all the caterwauling out of the left on Brexit:
http://theweek.com/articles/632380/how-brexit-shattered-progressives-dearest-illusions
LikeLike
The usual just in time vote after a bunch of brinksmanship
Also worth noting:
LikeLiked by 1 person
I really despise Sanders now. In the case of Puerto Rico, he’s pretty much come straight out for setting creditor repayment priority in bankruptcy based on politics:
http://www.thefiscaltimes.com/Columns/2016/06/24/Congress-Plan-Save-Puerto-Rico-Could-Ruin-It-Instead
LikeLiked by 1 person
In fact, this seems to be an almost Trump like approach to “negotiating” government debt repayment:
LikeLike
Frankly, making it more costly for government, any government in the US to borrow isn’t a bad thing.
LikeLike
obama did the same thing in the GM bail-out “bankruptcy.” He didn’t want some plain old bankruptcy judge determining who gets what.
LikeLiked by 1 person
ESPN’s First Take is now 5 women… Wonder who thought this would be a good idea… I cannot fathom what Disney is thinking unless some feminist group has them by the balls.
http://dailysnark.com/espn-makes-new-look-first-take-woman-panel-show/
LikeLiked by 1 person
Now this is how you do rent seeking. And put up barriers to trade. Well played
http://reason.com/archives/2016/06/30/how-government-cronies-redefined-the-cat
LikeLike
“As a result, from now on, catfish and a few other species of fish will be inspected by the U.S. Department of Agriculture’s Food Safety and Inspection Service rather than by the Food and Drug Administration’s seafood inspection program. All other seafood will continue to be inspected by the FDA.”
And of course there’s no reason why two different agencies should be doing food inspections.
But of course eliminating any government agencies is just anarchism with the end goal of Somalia.
LikeLike
Catfish are [mainly] NOT seafood, obviously. Most of them are grown on catfish FARMS, in Texas stocked by State P&W, from State hatcheries near Austin. And lakes are stocked for sport fishing by the State hatcheries, too.
See? Method in the madness is based on whether the fish are seafood or farm fish.
LikeLike
Mark:
See? Method in the madness is based on whether the fish are seafood or farm fish.
I am struggling to determine whether you are being facetious or serious.
LikeLike
Facetious.
Having grown up on a farm, I can tell you that the USDA continuously inspected dairies, slaughterhouses, and the like 65 years ago. All land grant colleges had Ag schools, whose labs were available to County Agents, so that if a disease was suspected by a farmer or rancher he could take a dead animal or sample wheat or corn to the County Agent and NC St. or Rutgers or TX A&M or Cornell or Mich St or Maryland or Penn State or UC Davis or Iowa State or wherever you were would have a full report back in no time.
Well, the FDA always did seafood because seafood is not plugged into the whole county agent land grant university system that operates well for the American meat and grain industries. Unlike USDA, FDA does not have this huge nation wide testing apparatus and generally as I recall the US Fish hatchery teams do the front end assessments of fish farms that USDA does for meat and grain. Then when a contaminated fish is reported that leads to an FDA test. So the fish system is less intrusive and less rigorous than the farm/ranch system. And everyone was OK with that b/c farmers and ranchers need the access to the county agents but fisheries just don’t.
Thus the rentseeking aspect of Cochran’s move – which also has the effect of slamming any imports of catfish with red tape. So this is something on review that Congress and POTUS agree about and if they would just get to work a little bit during an election year they could reverse Cochran’s BS plan.
LikeLike