3 Numbers to Watch: US Durable Goods, New Home Sales, Cons. Conf.
Today’s data is US-heavy, with three housing-related statistics and the week’s main event, durable goods orders. Markets are probably eyeing the end of the week for more speeches from Federal Reserve officials and the European summit.
The Bank of England’s governor Mervyn King gives evidence to the Treasury Committee at 08:30 GMT and The European Central Bank’s Coeure speaks in London at 09:10 GMT. Both Spain and Italy hold auctions. After markets close the US Treasury Secretary will speak at 21:00 GMT.
US May Durable Goods Orders (12:30 GMT). Total orders are expected to have risen by 3.2 percent in May from a year ago, almost unchanged from 3.3 percent in April, but the headline number is notoriously volatile, and the series has moved in a sideways manner since late 2011. Attention should be paid to the core excluding transportation and defence, but with already-reported low industrial production and weakness in manufacturing purchasing manager indices, a positive core number is not probable. With the Federal Reserve’s taper-talk, Zero Hedge reminds us that bad news are now bad for market, as weakness in the real economy will not be countered by additional measures from the Fed. Business Insider featured a long-term chart on durable goods spending as a share of gross domestic production, which showed that the ratio is at 60-year lows, suggesting that there is plenty of room for growth in fixed investments. For now, there is no sign of a break higher, so it is safe to assume a continuation of the recent range, and note the recent disconnect between the "hard data" and the stock market. Either the economy should surprise positively, or markets will soon be disappointed.
US May New Home Sales (14:00 GMT). The consensus expectation is for 462,000 homes sold in May, an increase of 1.8 percent from the 454,000 units sold in April. The long-term range since 1963 has been 400,000 to 800,000, but during the housing boom it managed to peak at a high of 1,389,000. After cratering spectacularly between 2007 and 2010, sales have been increasing at a steady pace since early 2011. It will be interesting to see how sales and prices will hold up after the interest rates seem to have bottomed out. Note that the S&P / Case-Shiller home price index and the FHFA House Price Index for April will both be released at 13:00 GMT, and higher prices coupled with higher sales would be good news for the economy. The two price indices are expected to have risen by by 11.1 and 12.1 percent respectively.
US June Consumer Confidence Index (14:00 GMT). The Conference Board’s proprietary consumer confidence index is expected to have dropped slightly to 75.5 from May’s 76.2, which was a surprisingly good reading and thus a small decrease in June should not be a negative. The preliminary U.Michigan / Thomson Reuters consumer sentiment index for June was already published earlier, so today’s index should have limited impact – especially as the effect of the latest market stress is probably not yet fully shown in the index. Should the CCI surprise, eyes turn to Friday’s final reading for the U.Michigan index.
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