NEW$ & VIEW$ (10 APRIL 2013)

Soft patch watch. Housing costs going up. OECD LEIs. Beware Slovania, but France and Europe even more. China car sales, trade data. Copper and oil. Sentiment watch.


Recent data points to a soft patch:

  • NFP Employment (payroll and household)
  • U.S. ISM
  • Vehicle sales
  • Unemployment claims
  • Heavy truck sales
  • NFIB

Small Firms Curtail Plans To Add Staff As Confidence Ebbs(Chart fro IBD)


Evidence of a slowdown has also played out in Citigroup’s U.S. Economic Surprise Index, which measures the degree to which economists’ consensus estimates have been too optimistic or pessimistic about data releases. The index has been trending lower over the past few weeks and on Monday fell to its lowest level since Feb. 25. (WSJ’s Market Beat)

Although not in housing:

U.S. Land Gets More Expensive

The rebounding U.S. housing market has sparked a sharp rise in land prices, creating big profits for land investors but putting pressure on builders to further increase the price of new homes.

[image]Land values across the U.S. rose on average 13% in 2012, the first annual gain since 2005, according to estimates in a March report by Zelman & Associates, a housing consultancy. (…)

Land cost constitutes 21.7% of the final sale price of a new home, according to the National Association of Home Builders. As land prices rise, builders tend to pass 100% of those costs on to consumers.

Buck Horne, a housing analyst with Raymond James & Associates, predicts that new-home prices will rise 10% to 15% in 2013, chiefly because of rising demand and because of the scarcity of land.


Lumber Prices near Housing Bubble High



OECD says growth picking up in most major economies

The Paris-based think tank’s composite leading indicator shows growth firming in Japan and picking up in China while the outlook is improving for Italy and France is stabilizing.




EU Sounds Alarm on Spain, Slovenia Economies

(…) In Spain, a deep recession, deleveraging and bumpy access to market financing remain a “tangible threat” the report warned. It called the country’s reform agenda “incomplete,” despite fiscal cuts and a deep restructuring of the banking sector as part of a €41.3 billion ($54.03 billion) financial sector bailout from the euro zone. (…)

Slovenia’s troubles emanate from excessive corporate debt that is sending ever more loans into the red—the report says 23.7% of corporate loans are nonperforming, which means they are in arrears for longer than three months.

“Credit is contracting and the interaction between weak banks and the sovereign has intensified. The state has de facto become the source of capital,” the report said. It warned that deleveraging in the banking sector combined with a double-dip recession are making it hard for companies to grow and are leaving troubled assets stuck on banks’ balance sheets. (…)

The Commission’s report identified another 11 countries that need to correct imbalances, but said these weren’t “excessive.” The countries are Belgium, Bulgaria, Italy, the United Kingdom, France, Italy, Sweden, Finland, Malta, Hungary and the Netherlands.

France, the euro zone’s second-largest economy, was losing its ability to deal with sudden economic downturns outside its borders, the report said.

“The resilience of the country to external hocks is diminishing and its medium-term growth prospects are increasingly hampered by long-standing imbalances,” it said.

But Gavekal is more realistic about France and the collateral damage to the Eurozone:

The severe squeeze on household income will ensure a collapse in French
imports which can only have negative consequences for producers in
Spain and Italy—for most eurozone countries France is their second largest export market.

France’s budget deficit is going to explode. Higher unemployment will push up government spending, while reduced consumption causes a
collapse in VAT receipts. And lower economic activity reduces all forms
of tax income that a voracious government machine so depends upon.



French long rates will quickly come under pressure as was the case for Spain and Italy once their budgetary situation deteriorated—the French government is hugely complacent about its entitlement to low cost funding even though any spike in rates will quickly make the budget situation untenable. (…)

But what especially scares me about the French situation is that the
economy is already suffering a huge credit crunch which can only get


EU intensifies reform pressure on France
Brussels issues stinging report on government’s efforts

(…) it warns that France’s increasing sovereign debt levels, which are expected to rise to 93.8 per cent of economic output next year, are not only choking off growth prospects but are threatening the country’s banking system and the broader European economy.

Weak economy adds to Hollande’s headache
As the president grapples with fallout from a scandal, France eked out 0.1% growth in the first quarter

Car sales back on fast track  China’s passenger vehicle sales returned to high-speed growth in March due to surging demand for entry-level cars, as well as the flurry of new models launched in the spring.

The total sales of passenger cars, sport-utility vehicles, multi-purpose vehicles and minivans jumped 15 percent year-on-year to 1,459,095 units in March, the third-highest monthly growth in a year, the association said.

The strong performance in March boosted first-quarter domestic passenger vehicle sales to 4.21 million units, up 19.2 percent year-on-year.

Rao also predicted robust growth in April as the Shanghai International Auto Show, which will start on April 21, will further boost consumption enthusiasm with new models expected to be launched by nearly all the brands.

China trade data raise accuracy worries
Volatility and discrepancies in the March figures questioned

China’s latest trade figures showed a sharp decline in export growth combined with a strong rebound in imports in March, but volatility and discrepancies in the data have raised concerns about their accuracy.

Exports from China increased 10 per cent in March from the same month a year earlier, compared with a 22 per cent increase in February, while imports surged 14.1 per cent in March, compared with a year-on-year drop of more than 15 per cent the previous month, according to Chinese customs administration data released on Wednesday.

China Exports Miss Forecasts as ‘Absurd’ Data Defended

An “astounding” 92.9 percent jump in exports to Hong Kong, the most in 18 years, raises questions on data quality, researcher IHS Inc. said.

The customs agency acknowledged concerns that the data may be overstated at a press briefing today while standing by its figures and saying the Hong Kong gains stem from different statistical methods. Sales to the U.S. and Europe both fell for the first time since November, leaving the world’s second- largest economy with weaker global demand to support a recovery.


Copper Sentiment Plunges, Critical Price Points for Copper and Crude Oil

(By Chris Kimble of Kimble Charting Solutions)

OPEC Trims Oil Demand Growth Forecast; March Output Drops

Worldwide oil consumption will rise this year by 800,000 barrels a day, or 0.9 percent, revised down from 840,000 last month, the Organization of Petroleum Exporting Countries said in its Monthly Oil Market Report today. Demand will rise to 89.66 million barrels a day in 2013 versus 88.87 million last year, OPEC estimated. The group’s output fell in March as Nigeria, Iran and Kuwait pumped less.

OPEC, which supplies about 40 percent of the world’s oil, produced 30.19 million barrels of crude a day last month, according to OPEC estimates based on secondary sources. That compares with 30.29 million in February.

Saudi Arabia, the world’s largest crude exporter, increased output to 9.12 million barrels a day in March from 9.08 million the previous month, OPEC said.



Bears Reign Supreme

Last week we asked Bespoke readers to complete our April market survey, and over at Bespoke Premium, we have just sent out our full analysis of this month’s results.  As shown below, a large majority of survey participants expect the S&P 500 to be lower one month from now. This is surprising given the market’s recent run to new highs, but it’s nothing new.  Throughout this entire bull run over the last few years, investors have been loathe to get long equities.

High five  But, as Bill Hardison (via Doug Short) notes, investors may say something but what counts is what they are doing.

The following chart shows margin debt levels in all accounts and is reported at the end of each month (with a lag). To make it an easier comparison with market data for Excel, the data point for the S&P 500 each month is, somewhat arbitrarily, a 5 day moving average of price on the last trading day of the month. Data for the amount of margin debt is only available through the end of February, though I extended the S&P data by one additional month to show it as of the end of March, thus including the new all — time high for the S&P.


What this chart is showing is that, despite the lack of participation in the rally that you hear about, account holders are acting so bullish that they have a near — record amount of margin debt. The actual record debt level (3.9% higher than now) occurred at the end of July 2007, about two months prior to the actual market peak. Surprised smile

Fingers crossed  Seoul on alert as N Korea moves missiles US commander reports movement of weapons


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