Draghi hints at co-ordinated strategy by central banks
Central bank fears investors may seek refuge in the yen
Greece plays a win-or-go-home game against Russia on Saturday in Europe’s quadrennial soccer championship. It faces a different kind of elimination match Sunday, when voters go to the polls in repeat elections that could determine the country’s future in the euro zone.
Brussels hopes to persuade country to stick to bailout deal
Equities and industrial commodities in demand
ITALY AND SPAIN IN DIRE STRAITS (Charts from RBC Capital)
Crunch time coming for Italy (chart from Moody’s):
U.K. EXPORTS COLLAPSE
The monthly data are volatile – exports had risen 5% in March – but the three-month trend, which gives better guidance to true export performance – showed goods exports down -2.5% on the previous three months, down sharply from a -0.5% trend rate in March and the weakest performance since April 2009.
There are no bright spots for UK exporters it seems, with demand weakening across the board in overseas markets, from Asia through to the Americas. Exports to non-EU countries collapsed by 10.3% compared with March, while exports to EU countries dropped 6.8%, resulting in a record trade gap with the rest of the EU. This is hardly surprising, as large parts of the Eurozone are now in a steep downturn and even the German economy is now stalling. (Markit)
THE U.S. SLOWDOWN
Retail sales will keep slowing
The projected deceleration by retail sales is largely the consequence of sluggish income growth. In all likelihood, employment income grew by a limp 3.3% year-over-year during the three-months-ended May 2012, which was considerably slower than retail sales’ accompanying 6.1% advance.
The statistical record strongly indicates that the growth of retail sales ought to gravitate toward employment income’s slower rise. If employment income remains in a range of 3.5% to 4%, then that is where retail sales growth is headed.
CoreLogic reports that the current residential shadow inventory as of April 2012 fell to 1.5 million units, representing a supply of four months. This was a 14.8 percent drop from April 2011, when shadow inventory stood at 1.8 million units, or a six-months’ supply, which is approximately the same level as the country was experiencing in October 2008.
Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been approximately offset by the equal volume of distressed (short and real estate owned) sales.
Of the 1.5 million properties currently in the shadow inventory, 720,000 units are seriously delinquent (two months’ supply), 410,000 are in some stage of foreclosure (1.1-months’ supply) and 390,000 are already in REO (1.1-months’ supply). The dollar volume of shadow inventory was $246 billion as of April 2012, down from $270 billion a year ago and a three-year low.
Foreigners are stepping up investment in the U.S. after retreating during the depths of the financial crisis, with the latest flurry spurred partly by Europeans seeking safe havens amid the Continent’s debt crisis.
The U.S. attracted $28.7 billion in foreign direct investment between January and March, the 12th consecutive quarter of positive flows, the Commerce Department said Thursday. Foreign investment in the U.S. has now exceeded its average of the past 10 years in 2010 and 2011, suggesting America’s lure for capital has recovered from the crisis.
China’s foreign direct investment inflows fell 1.9 percent in the first five months of 2012 from a year earlier amid jitters about Europe’s debt crisis and a slowdown in the world’s second-largest economy, but a slight upturn in May offered signs of stability.
FDI was $9.2 billion in May alone was up a slight 0.05 from a year earlier, marking the first monthly rise in inflows this year.
The Organization of Petroleum Exporting Countries kept its combined production ceiling for its 12 members at 30 million barrels a day, an outcome that had been telegraphed earlier this week following a bilateral meeting between ministers from Saudi Arabia and Iran, who lead rival factions within OPEC.
Kuwait oil minister Hani Abdulaziz Hussain, who is considered one of the group’s more consumer-friendly members, told reporters prior to the meeting that oil prices around $100 a barrel are “acceptable and reasonable” and that the group could meet again if oil prices slip below $90 a barrel.
The chart is from Bespoke Investment. Note the death cross and watch for the 200-d m.a. turning down.
China is hoarding crude at the fastest rate since the Beijing Olympics four years ago as the slump in international prices prompts it to import unprecedented volumes even as refining slows.
The world’s second-biggest oil consumer built up a surplus of about 90 million barrels of crude in the first five months of the year, government data show. The excess, the most since the run-up to the 2008 games, is probably being kept at emergency and commercial storage centers, according to the International Energy Agency. London’s Brent oil slid the most in more than three years in May.
China, which imports more than half its crude, is constructing about 200 million barrels of storage capacity in the second stage of a plan for strategic reserves to help it manage price swings. Overseas purchases rose to a record last month even as processing by refiners including China Petroleum & Chemical Corp. (600028) and PetroChina Co. slackened.
U.S. OIL CHANGING THE GAME
Two charts from RBC Capital: