Chinese PMI Print A Surprise!
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In This Issue.

* Global Growth gets a boost!.

* Eurozone PMI's print as expected.

* Brazilian real says I have volatility!

* What's up with two month old data?.

And Now. Today's A Pfennig For Your Thoughts.

Chinese PMI Print A Surprise!.

Good Day! . And a Tub Thumpin' Thursday to you! Cardinals win a crazy game in the 12th inning last night, so they were Tub Thumpin' into the night. I was thoroughly entertained at the Senior All-Star Water Polo Game last night, and got home to watch a couple of innings of the Cardinals game before the bedtime bell was ringing. Head East is singing again this morning with the currencies and metals, and The FOMC Meeting Minutes (FOMCMM) were a dud, as I suspected they would be, and an upside surprise in the Chinese PMI really got the markets riled up overnight, but have now settled back into dullsville.

So.. Where to start? Where to start? Hmmm. Well, I guess the Chinese PMI data surprise would be as good a place to start as any, eh? So. OK, yesterday, I told you that the HSBC/ Markit reading of Chinese PMI (manufacturing index) was usually the one that was the weaker of the two PMI readings that are done in China.. One by HSBC/ Markit, and the other by the Gov't. Well, for the first time since last October, the HSBC/ Markit PMI increased month to month from 48.1 to 49.7. I know that doesn't seem like a large increase, and it's still below 50, you know, the line in the sand between expansion and contraction.

Well, think about the increase like this. It's the strongest level the HSBC/ Markit report has printed year to date, and 48.1 to 49.7 IS a strong increase for an index like this that usually sees snail paced moves. And 49.7 is a rounding error from 50. So, this IS a report to get excited about for Asia, and the global growth countries. And with the global growth countries seeing the sun for the first time in a week, the Aussie dollar (A$), which I've always contended is the proxy for global growth currencies, saw some love.

So, the overnight moves were good. But then as the Asian traders handed the books off to Europe, things settled down, and the currencies and metals are flat as a pancake from that point. But while I've got China on my mind. as opposed to Carolina on my mind, not that there's anything wrong with Carolina! HA! I've got some additional thoughts on China.

I received a note from a dealer yesterday, announcing their association with Roy Morgan, a survey company, in creating a new Consumer Confidence Index for China. The ANZ-Roy Morgan China Consumer Confidence Index is intended to provide a real-time indication of China's domestic demand. You may all recall me telling you a few years ago, how China was attempting to move from an export-only driven economy, to one that is diversified with strong domestic demand. So. from now on, I'll be reporting on this index as a means of giving you all an indication of the Chinese economy from a domestic demand view.

For those of you keeping score at home, the ANZ-Roy Morgan China Consumer Confidence Index for May was stable at 152.5 VS April's 152.6. To me, this tells a different picture than the one the media seems to get all excited about in which they tell you and me that the Chinese economy is collapsing. Not so, according to this index. And not so, according to HSBC/ Markit!

But did all this upbeat news lead the Peoples Bank of China (PBOC) to allow an appreciation of the renminbi / yuan overnight? NOOOOOOOO! Pink Floyd's great song Comfortably Numb is playing on the IPod right now, and I believe that I'm becoming Comfortably Numb about what the PBOC is doing each night. I know it hasn't been that long since the PBOC started this lesson that they wanted to teach the markets, but when I see it appreciate one night, and weaken the next night, I get the feeling I've seen it all before, and I become Comfortably Numb.

The Eurozone flash PMI reports were bang on, as a whole, with the expectations of a 53.9 figure. Germany's manufacturing was stronger, and France's was weaker, nothing new there, but I have to think that the anti-euro people in Germany, (a small faction) would use this as ammo for their argument that Germany should leave the euro. Well, that's not going to happen folks, for the euro is Germany.

Whew! Just has an Inlyta moment, right here at the desk. and I'll leave it at that.

I told you on Monday that Canada would print their March Retail Sales report today, as the Data Cupboards around the world begin to wake from their week-long slumber. Of course, March was two months ago, and I'm not sure what the markets will think of data that old. But it is what it is. The markets are expecting the March Retail Sales to have weakened from February. If the data is too weak, then the Canadian dollar / loonie could see some selling, but a general weakness that's two months old, shouldn't upset the applecart too much.

First we talk about the country North of the U.S. and now the country South of the U.S. That's right, Mexico. Recent data from Mexico hasn't been painting a bright picture for the Mexican economy, but yesterday, we saw March Retail Sales increase .8% VS February. (what's up with all this two-month old data?) I said a year ago, that I liked Mexico better than I used to like it, and it was because of the new President, Nieto, and his list of reforms. Well, it appears that maybe we could be turning the corner with the Mexican economy, and maybe, just maybe, cause you never know, but maybe the weak data trend is over here. That would be a good thing for the peso. But remember, because of their past indiscretions with U.S. depositors and the pesos, the Mexican peso needs to have a "risk premium" in the interest rate. And the current interest rate levels are void of a "risk premium". So, until that happens (interest rates rise) the peso will struggle to carve out gains VS the dollar.

Now, moving even further South, we come to Brazil. The Brazilian real saw some gains yesterday VS the dollar and the recent gains VS the dollar, have been nice for real holders, but let me remind you that we saw this short-term trend of strength in the real at the end of summer last year, only to be knocked on its Kiester in the late fall. So, volatility might have been taken out of a lot of currencies these days, but it certainly hasn't been taken out of the real!

As a currency trader, that I used to be, I loved volatility! Especially when it went my way! HA! Speaking of volatility. I just saw a news headline that Thailand's army had declared a military coup. The military has announced that they had seized power in a coup so that they can restore stability and order after 6 months of political deadlock and turmoil. Remember, it was about 6 months ago, that I told you of the rumblings that a coup would be announced soon?

Good thing that can't happen here, eh? For the military would be seizing control all the time because of political deadlock and turmoil! Hmmm, maybe that's why it's being reported that the Dept. of Agriculture is buying machine guns and rounds of ammo.to protect them from the military coup! Or, maybe for other reasons, eh? Oh, no I said too much. I've said enough. That's me in the corner, that's me in the spotlight, losing my religion. Oh, no I said too much, I haven't said enough.

Well. Russia and China continue to bond. It was announced yesterday that Russia's Gazprom, will sell natural gas to China for the next 30 years. And guess what currency WON'T be used to settle the terms of trade? That's right, the dollar. I'm telling you now, so you can listen to me later, that Russia and China now have a common concern. the dollar as the reserve currency.

I see Gold picking itself off the floor right now, as it has gained $6 since I came in. More Groundhog Day stuff as far as I can tell. zerohedge.com is reporting this morning that Reuters reported that the Reserve Bank of India (RBI) and the finance ministry officials will recommend that the new government relax strict import rules to head off the surge in illegal buying, per officials with direct knowledge of the plan.

You know the plan to help the Current Account Deficit in India by curbing the importation of Gold, resulted in soaring illegal buying and smuggling of Gold, and those trades do not get registered into the official data for Gold. Just another reason I feel that Gold is being suppressed in price.

Well, I saw a headline story yesterday that Palladium had risen to a 33-month high, as S. African supply concerns are pushing the appreciation envelope for the metal. Then there are the fears going around that Russia's production / supplies could be interrupted too. So, for now Palladium is the cat's meow of metals.

But don't diss Platinum. and I saw on Ed Steer's letter this morning that the platinum market is expected to post a deficits of 1.218 million ounces this year according to Johnson Matthey. This is due mostly to the longest and costliest miner's strike in S. Africa, ever. and of course the drop in supplies from Russia, as the country deals with Ukraine problems over mining platinum! Platinum to me, looks like it wants to trade up to $1,500 oz..

Another Inlyta moment, and that makes three of them this morning, boy I'm sure am lucky today!

For What It's Worth. OK. I first saw this on Bloomberg, then zerohedge.com and finally Ed Steer's letter, So, that means it must really be a good article! It doesn't have much to it, just one guy that should know what he's talking about, saying that housing isn't as peachy as the media and Gov't would have you believe. let's listen in.

"More than half a decade after the collapse, and with talking heads proclaiming the recovery as strong as ever and the Fed remarking on the housing market's foundational pillar to that recovery, BlackRock's CEO Larry Fink has a few words of warning for the exuberant - the U.S. housing market is "structurally more unsound" today that before the last financial crisis. As the data comes in weaker and weaker, despite hopes for a post-weather bounce, the fact that the U.S. housing market is "more dependent on Fannie and Freddie than we were before the crisis," is a problem for the U.S. taxpayer and - unlike Mel Watt's 'free credit for everyone' approach to expanding the GSE's role, Fink says with strong underwriting standards, ownership of affordable homes can again become a foundation for American families."

Chuck again. But apparently, what he's saying is that there isn't strong underwriting standards. you have to back track to figure out what he's saying there. But the important part, is that Fink co-founded BlackRock in 1988 after a career at First Boston Corp, where he was known for his work in slicing and pooling mortgages and selling them as bonds. BlackRock is a $4.4 Trillion money manager now, so as I said above, this is someone that should know what he's talking about regarding housing.

To recap. The Asian and overnight markets got a wakeup call last night from China, as the HSBC/ Markit PMI printed an increase for the first time since last October, and brought the index near 50. The Global growth countries and currencies, led by Aussie dollars took the good news and ran with it.. The FOMCMM were a dud, as expected. Since the European traders took over, though, the currencies are flat as a pancake, with Gold, pushing higher by $6 this morning.

Currencies today 5/21/14. American Style: A$ .9235, kiwi .8565, C$ .9165, euro 1.3675, sterling 1.6870, Swiss $1.1195, . European Style: rand 10.3815, krone 5.9425, SEK 6.5820, forint 222.30, zloty 3.0565, koruna 20.0740, RUB 34.29, yen 101.65, sing 1.2530, HKD 7.7535, INR 58.45, China 6.1658, pesos 12.92, BRL 2.0265, Dollar Index 80.16, Oil $103.91, 10-year 2.55%, Silver $19.58, Platinum $1,483.26, Palladium $834.39, and Gold. $1,297.93

That's it for today. A very rough morning here for me, but it appears I'll get through it, and the rest of the day hopefully will be better. Stevie Ray Vaughn is singing, Look at Little Sister on the IPod, that'll get your foot tapping along. This VA Hospitals scandal is disgusting, and now they are going to be allowed to investigate themselves. What, what? Oh, well, Chuck, move along, nothing to see here.. Did you see how quickly I corrected that fuzzy math yesterday? I must have looked at the numbers several times, and didn't see it until it was too late! UGH! There are still questions though. And I would love to be the one who gets to ask the Fed to explain the difference! I think our little Christine is stopping to buy donuts this morning instead of breakfast sandwiches, so maybe a 2-cake donut cure will make things better for me today! Well, Cardinals go for the sweep tonight, they blew their last chance at a sweep last Sunday, so hopefully they learned their lesson! Well, this is late, due to all the interruptions this morning, so I hope you have a Tub Thumpin' Thursday.

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 05-22-2014 12:50 PM by Chuck Butler
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