National:

U.S. Stocks Decline on Chinese Data, Stimulus Speculation. U.S. stocks fell, giving benchmark indexes their first back-to-back drops in one month, as a contraction in China manufacturing offset American housing data and investors weighed Federal Reserve stimulus comments.

New U.S. Home Sales Rose to Second-Highest Level Since 2008. Sales of new U.S. homes climbed in April to the second-highest level in almost five years as lower borrowing costs and job gains drew more buyers into the market. Purchases (ETSLTOTL) rose 2.3 percent to an annualized pace of 454,000 homes from 444,000 in March that was faster than first estimated, the Commerce Department said today in Washington.

Jobless Claims Drop as U.S. Consumer Comfort Climbs. Fewer Americans applied for unemployment benefits last week, and consumer confidence approached a five-year high as the biggest part of the economy benefits from improving job and housing markets.

National news stories courtesy of www.bloomberg.com

International:

Contraction: PMI dips below 50 in China. Manufacturing activity is shrinking in China as the HSBC flash PMI fell into contraction territory for the first time in seven months in May, dropping to 49.6 from 50.4 in April, missing expectations. HSBC didn’t mince words in an appeal to Beijing: “The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of Q2, casting downside risk to China’s fragile growth recovery. Moreover, the further signs of labor market slackness call for more policy support. Beijing still has fiscal ammunition to do so.”

Eurozone composite PMI hits three-month high. The preliminary Markit composite PMI for the eurozone printed at 47.7 in May which, albeit still squarely in contraction territory, is still a three-month high. Both services and manufacturing “saw an easing in the rate of decline” but employment dropped for the seventeenth straight month. Ultimately, “the eurozone’s second recession in five years looks set to drag into a seventh successive quarter,” Markit’s chief economist Chris Williamson said. Individually, Germany’s flash PMI came in at 49.9, showing weakness across the currency bloc continues to weigh on the region’s largest economy.

International news stories courtesy of www.seekingalpha.com

National:

IRS chief’s resignation demanded, received, accepted. Acting IRS chief Steven Miller resigned Wednesday in the wake of the agency’s admission it unfairly screened Tea Party groups seeking tax exempt status from 2010 onward. President Obama called the screening “inexcusable” and emphasized that the IRS was the very last place where he would “tolerate [that] kind of behavior.” The White House also released the letter from Treasury Secretary Jack Lew in which Miller’s resignation was demanded.

U.S. oil boom fuels non-OPEC supply growth. Thanks to U.S. shale oil, demand for OPEC crude will remain largely unchanged over the next five years, the IEA said in its semi-annual report. “Output growth from North America dominates the medium-term growth profile,” as U.S. liquids production should increase by 2.8M barrels per day by 2018, accounting for half of non-OPEC growth during the period. Total U.S. output five years from now should reach 11.9M barrels per day, or around 20% of the projected total of 59.3M barrels per day of non-OPEC supply.

International:

French economy slips into recession. France slid into recession during Q1 as the French economy contracted 0.2% Q/Q after shrinking by the same amount in Q4. With unemployment at record levels and President François Hollande’s popularity at all-time lows, the country faces an uphill battle to right the ship as it struggles to bring its deficit in line with the EU-mandated 3%, while simultaneously restoring growth. Economists project a 0.2% contraction for the full year and a survey of French citizens shows just 11% believe Hollande can bring down the jobless rate by year’s end.

Germany avoids recession, revises down Q4 GDP data. Unlike its less economically fortunate eurozone core compatriot France, Germany managed to avoid falling into recession in Q1, albeit by the narrowest of margins. The German economy expanded by 0.1% during the quarter, less than the 0.3% growth economists expected, as harsh winter weather, falling exports, and lackluster investment took their toll. Germany’s statistics office also revised down its GDP data for Q4, saying the economy shrank by 0.7% during the period, more than the 0.6% contraction previously reported. The data come on the heels of ZEW’s investor confidence reading which showed persistent worries about the state of the eurozone economy writ large continue to weigh on sentiment.

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National:

Senate passes Internet sales tax bill. In an effort to end tax-free shopping on the Internet, the Senate passed a bill Monday empowering states to impose sales taxes for purchases made online. The measure — which passed by a 69 – 27 margin with bipartisan support — next goes to the House of Representatives, where anti-tax sentiment among many Republicans may make it more difficult to push through. eBay (EBAY) is fighting to make retailers with less than $10M in online sales or less than 50 employees exempt, while Wal-Mart (WMT) and unlikely bedfellow Amazon (AMZN) support the bill.

Obama indicates support for boosting LNG exports. President Obama has signaled his backing for increasing the U.S.’s exports of natural gas, saying that the country will probably be a net seller of LNG by 2020. The Department of Energy is assessing applications for 20 projects to export gas to nations with which the U.S. doesn’t have a free trade agreement. Companies that could benefit include Cheniere Energy (LNG), while Dow Chemical (DOW) is among those opposed.

International:

In China, consumer prices rise, producer price deflation persists. Consumer prices rose 2.4% in China during April, up from 2.1% in March and slightly above economists’ estimates, although still well below the government’s 3.5% target. Producer prices — now in their fourteenth straight month of decline — fell 2.6%, a steeper drop than expected. Stocks in Hong Kong and Shanghai fell 0.14% and 0.6% on the session following the data.

Israeli air strike on Syria sends crude higher. Crude prices have received a boost from their favorite catalyst: geopolitical tension. Brent futures hit their highest levels in a month, while Nymex jumped as well, after Israel carried out air strikes on Syrian targets over the weekend. Expect the risk premium that investors attach to oil to rise further in the coming weeks should rhetoric surrounding possible U.S. intervention heat up. At the time of writing, Brent was +0.5% and Nymex was +0.35%.

www.seekingalpha.com

National:

FOMC signals flexibility in asset purchases. One would be hard pressed to point out the differences between Wednesday’s FOMC policy statement and that released in March. There was one new sentence however: “The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.” The consensus seems to be that, taken with unchanged inflation language; the new nod to flexibility tacitly suggests an increase in the size of monthly asset purchases may be on the horizon. Esther George, once again the lone brave hawk amongst a flock of aggressive doves, dissented for the third time in as many meetings.

U.S. national debt to fall in Q2. In what certainly seems like an unlikely turn of events, the U.S. government will retire $35B in bonds, notes, and bills during the second quarter, as spending cuts and higher tax receipts allow the Treasury to defy projections which showed net debt outstanding rising by over $100B during the three month period. If the national debt does indeed fall, it will be the first quarterly reduction since 2007. The respite will of course be short-lived, as the Treasury plans to borrow $223B from July through September, WSJ said.

International:

HSBC China PMI revised lower. China’s final April HSBC manufacturing PMI printed at 50.4, slightly lower than the “flash” print released April 22 and markedly lower than March’s 51.6 reading. In keeping with the official government PMI released Wednesday, HSBC said new export orders fell into contraction territory for the first time in 2013. The manufacturing data, combined with subpar GDP growth, could “invite more policy responses in the coming month,” HSBC said.

ECB seen cutting rates. The Fed did its part Wednesday to perpetuate the global monetary easing status quo and the Bank of Japan has gone above and beyond. Now it’s the ECB’s turn — at least that’s how the market sees things. With eurozone unemployment running at all-time highs and inflation tracking well below the ECB’s target, expectations are for a 25 basis point rate cut. Regardless of the outcome, grave doubts will persist about the central bank’s ability to combat a crisis which, increasingly, is seen as endemic to the structure of the currency bloc itself.

In Japan, spending soars and unemployment falls. Abenomics got a vote of confidence from Japanese consumers in March as household spending jumped the most in nine years, while the jobless rate in Japan fell to a four year low. Spending rose 5.2% Y/Y, obliterating estimates of a 1.8% increase, as the wealth effect created by soaring stock prices fueled demand for cars and home repairs. The unemployment rate came in at 4.1% for March, better than the 4.3% rate forecast by economists.

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National:

U.S. economy set to grow 3% – due to accounting change. The U.S. economy will become 3% larger in July as the government becomes one of the first to use a new international standard for GDP accounting. Among other things, statisticians will now take into account R&D investment, which will add just over 2%, and creative works, which will add another 0.5%. The government will backdate the alterations to 1929, so there are unlikely to be changes in trends or cycles.

Senate clears way for vote on Internet sales tax. The Senate yesterday voted 74-20 to limit debate on legislation that would force retailers to collect taxes for online sales, opening the way for a final vote on the measure, which could take place this week. The White House officially backed the bill for the first time, although its prospects in the House are uncertain even if it passes the Senate.

International:

China April PMI disappoints. Chinese flash HSBC PMI dropped to 50.5 in April from 51.6 in March, missing expectations by a full point. “New export orders contracted after a temporary rebound in March, suggesting external demand for China’s exporters remains weak,” says HSBC. “Weaker overall demand has also started to weigh on employment in the manufacturing sector.” The disappointing reading comes not long after Q1 GDP growth slowed to 7.7%, and it helped send Asian stocks lower.

Spanish unemployment exceeds 6M. Spanish unemployment rose to a fresh record of 27.2% in Q1 from 26% in the previous quarter and topped consensus of 26.5%, with 6.2M people out of work. Youth unemployment increased to 57.2%. The figures “highlight the serious situation of the Spanish economy as well as the shocking decoupling between the real and the financial economy,” says Citi strategist Jose Luis Martinez. The Ibex was -1.2% at midday in Europe.

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National:

Obama signs $109B sequester order for 2014. President Obama yesterday signed a $109B sequester order for FY 2014, with discretionary spending set to drop by $91B to $967B, the lowest amount since 2004. The signing came just hours after Obama introduced a budget that would replace those sequester cuts.

Affordable Care Act not so affordable for small companies. Small businesses are considering their strategies ahead of the introduction of the Affordable Care Act in January amid fears of a steep rise in costs because of a provision that will force them to provide health coverage to full-time workers. These include dropping coverage for all employees and paying fines instead – as this could prove cheaper – and forcing full-time staff to become part-time.

Jobs growth seen slowing. Unemployment data for March was due out Friday morning, with economists expecting that nonfarm payrolls grew by 193,000 vs 236,000 in February, with the jobless rate staying unchanged at 7.7%. However, Calculated Risk’s Bill McBride reckons the forecasts may be optimistic, based on recent other data, with the manufacturing and services PMIs suggesting something a little closer to a gain of 150,000 jobs. Stock futures were lower ahead of the print.

 International:

Chinese imports suggest solid demand. China swung to a shock trade deficit of $884M in March from a surplus of $15.25B in February, badly missing forecasts for a surplus of $14.7B. Imports rose 14% and beat consensus, helping to reduce worries over the strength of domestic demand, while exports climbed 10%. However, questions have been raised about the data, especially with exports to Hong Kong rising by what researcher IHS says is an “astounding” 92.9%.

Chinese inflation falls sharply. Chinese CPI slowed to +2.1% on year in March from +3.2% in February – when New Year holiday demand affected prices – and came in below consensus of +2.4%. A softening of rises in food costs helped offset an increase in fuel expenses to bring overall inflation lower and give China’s central bank more flexibility over monetary policy. The news helped boost equity markets across the globe.

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National:

Apartment vacancy rate falls to lowest level since 2001. The U.S. apartment vacancy rate fell to its lowest level in more than a decade, but persistent stagnant income growth for U.S. workers has tempered the ability of landlords to raise rents, according to an industry report released on Wednesday.

Jobless claims at four-month high, cast shadow over jobs market. The number of Americans filing new claims for unemployment benefits hit a four-month high last week, the latest suggestion the labor market recovery lost some momentum in March.

Companies hire fewer in March, service sector growth slows. Companies hired at the weakest pace in five months in March as recent strong demand for construction jobs evaporated, while growth in the vast services sector slowed, signs that the economic recovery could be hitting a soft patch.

All national articles from: www.reuters.com

International:

Eurozone unemployment stays at record high. As forecast, eurozone unemployment remained unchanged on the month in February at 12%, although that’s somewhat greater than the 10.9% rate a year earlier. As you’d expect, the highest jobless levels were in Greece (26.4%) and Spain (26.3%) respectively, while Austria (4.8%) and Germany (5.4%) enjoyed the lowest unemployment.

Eurozone inflation drops further away from ECB’s target. As expected, eurozone inflation dropped to an annual rate of 1.7% in March from 1.8% in February, falling further away from the ECB’s target of just under 2%. Given the fairly poor state of the eurozone economy, the decline in prices could provide scope for the ECB to ease monetary policy further when officials meet tomorrow, although it’s not expected to cut interest rates from the current level of 0.75%.

Eurozone PMI contraction deepens. Eurozone manufacturing PMI dropped to a three-month low of 46.8 (flash 46.6) in March from 47.9 in February, as a fall in output and new orders gathered pace and brought further job losses. Eurozone countries either experienced sharper rates of decline or – in the cases of Germany and Ireland – slid back into contraction.

All international articles from: www.seekingalpha.com

National:

Government funded until September. President Barack Obama yesterday signed the FY 2013 funding bill into law, one day before the previous financing measure was due to expire. The package includes the $85B of sequestration and ensures that the government will be financed until the end of the fiscal year in September, with spending projected at $984B.

Cheniere to export £10B worth of gas to U.K. Cheniere (LNG) has signed a £10B 20-year deal to provide 1.7M metric tons of gas per year to U.K. energy company Centrica (CPYYF.PK) in the first such deal between a U.S. supplier and a British utility. The deal is subject to Cheniere securing financing and the required regulatory approval, which isn’t necessarily such a sure thing given the opposition to gas exports in the U.S.

International:

Cyprus reopens banks under tight restrictions. Stiff capital controls announced Wednesday designed to cut off the flow of money were in place as Cypriot banks reopened this morning. Banks have been shut for nearly two weeks as the government negotiated a bailout package with the EU and became the first eurozone country to impose losses on bank depositors. Cash withdrawals are limited to €300 per day, time deposits cannot be withdrawn until maturity, and check-cashing is banned. Additionally, anyone leaving the country may take only €1K euros with them, down from €3K in an early draft of the restrictions.

S&P trims GDP forecast for euro-zone. S&P reduced its estimate for 2013 euro-zone GDP to -0.5% from a prior estimate of -0.1% with financial conditions in the region becoming weaker. A report from the agency finds exports in Spain and Portugal holding up but lagging in France and Italy.

South Korea cuts estimates for Q4 GDP. The Bank of Korea says GDP in South Korea grew 0.3% in Q4, a slight reduction from its initial estimate of 0.4%, as the impact of a weak yen continues to take its toll on exports. The central bank forecasts economic growth of 2.8% for 2013 after pegging GDP at 3.2% just a few months ago.

www.seekingalpha.com

National:

Fed keeps foot on the pedal. As expected, the FOMC has left its $85B-a-month QE program in place, saying that the economy has returned to moderate growth even while fiscal policy has become more restrictive. Notable among the revised economic projections was an expected improvement in the unemployment rate. The Fed’s announcement helped give shares a lift and boost the Dow to a new intra-day high.

Senate OKs government funding bill. The Senate yesterday easily passed a bill to finance the government until the end of September, thereby forestalling any fears of a government shutdown. The package includes $85B of sequestration but gives the Pentagon more leeway to decide on where to cut spending. The bill is due to go to the House for a vote today, when it’s expected to be approved.

1.7M homeowners escape negative equity in 2012. The number of mortgage borrowers in negative equity fell to 10.4M in Q4 from 10.6M, data from CoreLogic shows, with the improvement due to the recovery in the housing market. Overall, 1.7M properties climbed back into positive equity in 2012. The state with highest proportion of underwater households was Nevada with a rate of 52.4%.

International:

Deterioration at eurozone factories hits EU shares and the euro. The contraction in eurozone manufacturing has unexpectedly deepened this month, with PMI falling to 46.6 from 47.9 in February. Even German manufacturing shrank after growing in February. “The concern is that the (economic) downturn has gathered pace again,” says Markit. Instead of stabilization as many have been hoping for, the slump could “intensify in the coming months.” The data dragged down European shares and the euro, which was -0.25% vs the dollar at midday in Europe.

Chinese HSBC PMI rises. In contrast to the eurozone, Chinese factories have continued their recovery this month, with flash HSBC PMI rising to 51.7 from 50.4 in February, which was distorted by the week-long New Year holiday. Consensus was for 50.8. “The Chinese economy is still on track” for a “gradual growth recovery,” says HSBC’s Qu Hongbin. “Inflation remains well behaved, leaving room for Beijing to keep policy relatively accommodative.”

China risks financial crisis – Nomura. China’s economy is showing the same symptoms that sparked the financial crisis in 2008, Nomura warns, citing a spike in leverage to a record 155% of GDP in 2012, a fall in potential growth, and soaring property prices. Should the government maintain loose monetary policy this year, the risk of a crisis in 2014 would increase. “The true extent of the financial risks in China is not fully appreciated by investors,” Nomura says.

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