#US100: Real Estate CRASH and China's trade Collapsing
Updated
#US100 Trend Short Bearish
Market Phase High Volatility
Current Phase: Sideways Bearish
VP Shift: D-Shape
Fundamentals
Americans pay $ 2,538 a month for their home loan
Who can, should, wants to pay for it? Three years ago, Americans paid ( on average ) less than $ 1,500 a month for their real estate loan. Today they pay $ 2,538. This is a record high, and an increase of 11.6% over the previous year, according to the current data of the provider Redfin. In the first graphic we see the course of the years 2020 to 2023. The orange line shows this year's climb. In the second graphic, we have seen the development of sales of existing houses in the #USA since 2003. The current crash does not yet reach the dimension of the 2008 financial crisis, but it is a significant crash. Sure: When the monthly burden on a property is no longer sustainable for the average American, fewer and fewer people buy a house. The 30-year mortgage rates are loud Mortgage Bankers Association currently at 6.43 %. At the end of 2021 – shortly before the start of the big interest rate turnaround in the USA, it was around 3 %.
This new high in the monthly burden on a real estate loan in the USA was reached, according to Redfin, although the average selling price for homes in the four weeks to the 16th. April decreased by 2.6% compared to the previous year – is the largest decline in over a decade. Increased housing costs are one reason why potential home buyers are reluctant: upcoming house sales have decreased by 19% compared to the previous year, the largest decline in almost three months, and mortgage purchases decreased 10% last week. Buyers are also hampered by the lack of houses for sale because the number of new advertisements has decreased by 21% because homeowners rely on comparatively low mortgage rates.
But even if fewer people buy a house, many are looking for it. The Homebuyer Demand Index from Redfin – a measure of inquiries about visiting houses, submitting an offer or starting a house search – rose in the week to the 16th. April by 3% compared to the previous week and by 12% compared to the previous month %. Compared to the previous year, the demand index fell by 7%, which is the smallest decline in eleven months.
„ #Home buyers go window shopping and many enter the shop, but only a few of them come to the checkout “, as Redfin's deputy chief economist Taylor Marr puts it. „ There is not much choice on the shelves, and high mortgage rates and still high prices make houses too expensive for many buyers. Some buyers are discouraged by the rise in mortgage rates this week, partly due to the unexpectedly high bank profits that an increase in interest rates will result from Federal Reserve make it more likely next month. “
Nasdaq: The climb remains fragile – Rally weighs solely on Big Tech
Driven by strong Apple numbers and a rebound in the struck Bank shares there was a rally on Wall Street on Friday. The market width S&P 500 rose by 1.85% to 4,136 points, while the Nasdaq 100 even recorded an increase of 2.13% to 13,259 points. The Dow Jones had a gain of 1.65% to 33,674 points. With the Quarterly report from Apple, the reporting season in the United States has reached its peak. The Big Tech values all delivered good numbers, which kept the technology index Nasdaq at a high level.
This week the focus is on new ones Inflation data, mainly because the labor market report on Friday was significantly better than expected. Given the robust labor market, fears are increasing that consumer prices ( CPI ) could be higher than expected. The sharp rise in wages is an indication of this. As the US Department of Labor announced, average wages rose 0.5% in April compared to the previous month, but were expected to be only 0.3%. Hourly wages even rose by 4.4 percent compared to the same month in the previous year. Inflation could remain sticky due to rising wage growth. An early one Change in interestthe US Federal Reserve is becoming increasingly unlikely. The longer the interest rates remain at a high level, the thinner the air for sensitive technology stocks is likely to become.
Nasdaq: Big Tech reviews a problem?
Nevertheless, many investors have recently accessed Big Tech shares. But that is mainly due to the banking crisis. Investors are currently preferring safe ports such as gold and solid companies, which include big tech values in particular. These recently led the rally in Nasdaq. Because of the enormous market weighting alone, Apple is a driver of the rally. The heavyweight increased by 33% this year and was therefore an important pillar for the Nasdaq. However, Big Tech is now extremely sporty. Apple comes up with a PE ratio ( KGV ) of 29.50, which is significantly above the historical average. The share was valued higher only once before, during the Corona crisis ( KGV of 35.3 ).
The PE ratio of the Nvidia share, however, reached a value of 164.80, never before was the share so expensive. The current AI hype probably has a large part in it. Considering that earnings per share ( EPS ) of the large tech heavyweights like Microsoft and Apple have been stagnating for a year and a half or in the case of Nvidia even declined sharply, suggesting that there is not much room for maneuver. However, given the high weighting, the Nasdaq is dependent on Big Tech. If the tech heavyweights stall, it will also be difficult for the Nasdaq. The market width is therefore the big drawback, this is particularly evident in the wide-ranging Nasdaq Composite. The Advanced / Declineindicatorcurrently shows the non-existent market width. So the recent surge remains fragile as long as the rally is mainly on Big Tech's shoulders.
Nasdaq: Outbreak attempt
For the Nasdaq 100, the weekly closing went to a new annual high of 13,293 points. The Nasdaq 100 Futures climbed to a high of 13,358, which means that it was just under the high of 01. May at 15,365. But at the upper limit of the sideways range at around 13,350 it was over for now. Since 30. March, the technology index mainly deals in a range between 12,960 and 13,350 points.
In order for the eruption to succeed on the top, the Nasdaq Futures must rise sustainably over the barrier. Then he could aim for the next mark at 13,420 and the zone at 13,565 / 615. An increase up to the course of the 16th. August at 13,732 would also be possible. However, it only becomes critical again when the index falls below 13,030 and then breaks the lower limit of the range. In this case, taxes up to 12,810, 12,737 or 12,678 are likely.
#Realestate: does the crash start from #Sweden?
Since interest rates have risen worldwide, real estate prices have been under pressure - this is especially true for Sweden
Since interest #rates have risen worldwide, real estate prices have been under pressure –, especially for Sweden. Real estate prices have been falling sharply there for months, now the larger landlord of commercial real estate is coming under pressure. Is that just the tip of the iceberg?
Because in the USA, too, the prices for commercial real estate in descending flight – are a problem for the US regional banks, which are already under pressure, and which have granted the most loans in this area. Morgan Stanley expects one for the American commercial real estate market bigger price drop than even in the financial crisis.
In #Europe, however, Sweden could be the first domino to fall in real estate! In Sweden, prices were in times of zero interest rates massively increased, now the crash threatens. Many Swedes only paid interest for years, but did not repay the loan at all – in anticipation of further rising property prices. The situation with commercial estate in Sweden is even more precarious.
Sweden: Real estate crisis worsens – Focus on commercial real estate
The financing terminal in parts of the Swedish real estate sector is escalating. One of the country's largest commercial real estate rental companies, SBB, has announced that it will suspend its dividend payment after downgrading its credit rating to the high standard level. He also canceled a planned capital increase with which he wanted to strengthen his balance sheet. Bloomberg reports that.
The share price of #Samhallsbyggnadsbolaget i Norden AB fell on Tuesday by up to 9.5% to the lowest level in five years. There had already been a 20% price slide on Monday after the rating agency S&P Global Ratings had lowered the SBB credit rating to the high standard level.
#SBB announced on Tuesday night that the market reaction had thwarted a planned subscription rights issue for young shares in the amount of 2.6 billion crowns ( 233 million euros ) and that real estate would therefore be sold, to strengthen liquidity. It also announced that the dividend would be postponed.
SBB is symptomatic of a major problem in the Swedish real estate industry. The equivalent of around EUR 37 billion is due in the next five years, a quarter of which is due this year. They are therefore also considered an early warning signal for the European real estate sector in general, because a large part of their debts have short-term and variable interest rates.
Arctic Securities AS welcomes SBB's plan to improve its liquidity situation. “ These two decisions, the suspension of the dividend payment and the cancellation of the planned issue of D shares, are generally positive for SBB shareholders ”, said real estate analyst Michael Johansson. “ The problem for SBB is that the dividend has already been decided by the general meeting, so their only option is to suspend it. ”
Sweden's largest landlord is fighting with a debt burden of the equivalent of more than seven billion euros. The downgrading and the stock collapse are also blows for CEO Ilija Batljan, who has repeatedly assured investors that he would take action, to defend the company's first-class rating in the face of rising interest rates and increasing investor fear of the sector.
Danske Bank A / S sees the canceled share issue as a “ sign that #SBB currently has no access to the capital markets ”. This increases the refinancing risks.
Real estate prices in Sweden: Descent continues unabated
Swedish real estate prices continued one of the worst descents in the world, which could be further fueled by the interest rate hikes, which have not yet become fully effective.
Home prices fell seasonally adjusted by 1% in April, led by the drop in single-family house prices, according to SBAB data published on Monday. This follows a decrease of 0.
8% in March.
The data were released after the Swedish central bank announced a half-point increase in interest rates to 3.5% last week and forecast a high of 3.65. Since most Swedish mortgage rates are only set for three months, it will take some time for the Riksbank's latest move to fully affect borrowers. The state lender therefore assumes that the trend that can be observed in Canada and Australia, among others, will continue as mortgage costs continue to rise.
Sweden's house prices will continue to fall, not only the Swedish central bank warns:
„ We expect prices to continue to fall in spring and early summer, especially if the recent increase in Riksbank has been fully incorporated into mortgage rates “, SBAB chief economist Robert Boije said in a statement.
The weakness of the real estate market, which according to SBAB has so far led to an average loss in value of 16% for single-family houses, is weighing on the Swedish economy. It also means problems for the construction sector, which accounts for around 11% of Swedish economic output. In the first four months of the year, the number of bankruptcies in the construction industry rose by 29%, according to data published by the credit agency UC on Tuesday.
China's trade with the United States and Europe continues to collapse
China: Lousy import numbers – global recession likely
The western financial markets are reacting with falling courses on the extremely weak data on the import of China – because this has made a global recession more likely.
One thing is also becoming increasingly clear: the recovery in China is much weaker than expected, the Middle Kingdom cannot fulfill the function of the growth locomotive for the global economy even after the lockdowns have ended.
China is facing declining imports and slower export growth, which is clearly clouding the country's economic outlook. China's trade with the United States and Europe continues to break in, which suggests either a sluggish economy up to the recession or a further progressive decoupling with China – or both.
Either way: the miserable import data show a massive weakness in demand in China – because the decline in China's imports of -7.9% compared to the same month in the previous year is dramatic in that regard, when large parts of China were in the lockdown at the time! So now, despite the end of the lockdowns, imports continue to fall.
China: Significantly shrinking imports, slower growing exports
China's imports shrank significantly in April, while exports rose at a slower pace. This development reinforces the signs of weak domestic demand despite the lifting of COVID restrictions and puts additional pressure on the economy, which is already struggling with slower global growth.
Compared to the previous year, imports into the second largest economy in the world fell by 7.9% after having already decreased by 1.4% in the previous month. Exports, on the other hand, increased by 8.5%, which means a slowdown compared to an increase of 14.8% in March, as stated by the customs authority's data on Tuesday emerges.
In a survey, economists did not expect growth in imports, while an increase of + 8.0% in exports forecast had been.
Government officials have repeatedly warned of a „ difficult “ and „ complex “ external environment.
However, the significant deterioration in trade flow in the past month will only increase concerns about foreign demand and the risks to the domestic economy, especially against the background of the weak recovery compared to the previous year, when imports and exports were severely affected by the COVID 19 restrictions in China.
The decline in imports suggests that the global economy can no longer benefit greatly from China's domestic growth engine. At the same time, it is also increasing the extent of the weakness of some important trading partners such as Vietnam as a sign of a global recession.
According to analysts, the drastic monetary tightening measures of the past 12-18 months and the recent burdens in the western banking sector are worrying both China and the global economy about the recovery prospects.
China: Declining exports to the United States and Europe
Exports to the United States decreased -6.5% year-on-year to $ 43 billion in April, while imports fell -2.9% to $ 13.3 billion. China's trade surplus shrank by -7% to $ 29.7 billion.
Trade with Europe also declined. Exports to the European Union decreased by -17.7% in April to $ 44.7 billion in April. Imports also shrank by -38.6% to $ 23.4 billion. At the same time, China's trade surplus with the EU grew by + 31.5% to $ 21.3 billion.
Deliveries to ASEAN slowed to + 4.5% in April, compared to + 35.4% in the previous month. The region is China's largest export partner.
Declining imports of important raw materials indicate a waning economy
China's coal imports also declined in April after reaching their highest level in 15 months in the previous month. This indicates a decline in economic demand. Imports of copper, an indicator of global growth and natural gas, also declined during this period.
Overall, the data again paint a mixed picture of the economy in China. The recovery is further slower than hoped. The consumption that Xi Jinping wanted to establish as the second pillar of the economy with its „ inner cycle “ does not really start. Europe and the United States take less goods, and that is the end of it decoupling continue – either because the economy is weak, or because it is politically wanted.
China continues on its way and finds other sales markets. The latest official purchasing manager index for manufacturing in April showed a significant contraction of the new export orders, which illustrates the challenges, Chinese decision-makers and companies are facing each other in the hope of a robust economic recovery after COVID.
Disclosure according to § 80 WpHG for possible conflicts of interest:
The author of this publication declares that he can be invested in any of the financial instruments mentioned, analyzed or commented on at any time. This may result in a conflict of interest. However, the author assures that he has prepared every analysis and every market comment in compliance with journalistic due diligence, in particular the obligation to report truthfully as well as the necessary expertise, care and conscientiousness.
Market Phase High Volatility
Current Phase: Sideways Bearish
VP Shift: D-Shape
Fundamentals
Americans pay $ 2,538 a month for their home loan
Who can, should, wants to pay for it? Three years ago, Americans paid ( on average ) less than $ 1,500 a month for their real estate loan. Today they pay $ 2,538. This is a record high, and an increase of 11.6% over the previous year, according to the current data of the provider Redfin. In the first graphic we see the course of the years 2020 to 2023. The orange line shows this year's climb. In the second graphic, we have seen the development of sales of existing houses in the #USA since 2003. The current crash does not yet reach the dimension of the 2008 financial crisis, but it is a significant crash. Sure: When the monthly burden on a property is no longer sustainable for the average American, fewer and fewer people buy a house. The 30-year mortgage rates are loud Mortgage Bankers Association currently at 6.43 %. At the end of 2021 – shortly before the start of the big interest rate turnaround in the USA, it was around 3 %.
This new high in the monthly burden on a real estate loan in the USA was reached, according to Redfin, although the average selling price for homes in the four weeks to the 16th. April decreased by 2.6% compared to the previous year – is the largest decline in over a decade. Increased housing costs are one reason why potential home buyers are reluctant: upcoming house sales have decreased by 19% compared to the previous year, the largest decline in almost three months, and mortgage purchases decreased 10% last week. Buyers are also hampered by the lack of houses for sale because the number of new advertisements has decreased by 21% because homeowners rely on comparatively low mortgage rates.
But even if fewer people buy a house, many are looking for it. The Homebuyer Demand Index from Redfin – a measure of inquiries about visiting houses, submitting an offer or starting a house search – rose in the week to the 16th. April by 3% compared to the previous week and by 12% compared to the previous month %. Compared to the previous year, the demand index fell by 7%, which is the smallest decline in eleven months.
„ #Home buyers go window shopping and many enter the shop, but only a few of them come to the checkout “, as Redfin's deputy chief economist Taylor Marr puts it. „ There is not much choice on the shelves, and high mortgage rates and still high prices make houses too expensive for many buyers. Some buyers are discouraged by the rise in mortgage rates this week, partly due to the unexpectedly high bank profits that an increase in interest rates will result from Federal Reserve make it more likely next month. “
Nasdaq: The climb remains fragile – Rally weighs solely on Big Tech
Driven by strong Apple numbers and a rebound in the struck Bank shares there was a rally on Wall Street on Friday. The market width S&P 500 rose by 1.85% to 4,136 points, while the Nasdaq 100 even recorded an increase of 2.13% to 13,259 points. The Dow Jones had a gain of 1.65% to 33,674 points. With the Quarterly report from Apple, the reporting season in the United States has reached its peak. The Big Tech values all delivered good numbers, which kept the technology index Nasdaq at a high level.
This week the focus is on new ones Inflation data, mainly because the labor market report on Friday was significantly better than expected. Given the robust labor market, fears are increasing that consumer prices ( CPI ) could be higher than expected. The sharp rise in wages is an indication of this. As the US Department of Labor announced, average wages rose 0.5% in April compared to the previous month, but were expected to be only 0.3%. Hourly wages even rose by 4.4 percent compared to the same month in the previous year. Inflation could remain sticky due to rising wage growth. An early one Change in interestthe US Federal Reserve is becoming increasingly unlikely. The longer the interest rates remain at a high level, the thinner the air for sensitive technology stocks is likely to become.
Nasdaq: Big Tech reviews a problem?
Nevertheless, many investors have recently accessed Big Tech shares. But that is mainly due to the banking crisis. Investors are currently preferring safe ports such as gold and solid companies, which include big tech values in particular. These recently led the rally in Nasdaq. Because of the enormous market weighting alone, Apple is a driver of the rally. The heavyweight increased by 33% this year and was therefore an important pillar for the Nasdaq. However, Big Tech is now extremely sporty. Apple comes up with a PE ratio ( KGV ) of 29.50, which is significantly above the historical average. The share was valued higher only once before, during the Corona crisis ( KGV of 35.3 ).
The PE ratio of the Nvidia share, however, reached a value of 164.80, never before was the share so expensive. The current AI hype probably has a large part in it. Considering that earnings per share ( EPS ) of the large tech heavyweights like Microsoft and Apple have been stagnating for a year and a half or in the case of Nvidia even declined sharply, suggesting that there is not much room for maneuver. However, given the high weighting, the Nasdaq is dependent on Big Tech. If the tech heavyweights stall, it will also be difficult for the Nasdaq. The market width is therefore the big drawback, this is particularly evident in the wide-ranging Nasdaq Composite. The Advanced / Declineindicatorcurrently shows the non-existent market width. So the recent surge remains fragile as long as the rally is mainly on Big Tech's shoulders.
Nasdaq: Outbreak attempt
For the Nasdaq 100, the weekly closing went to a new annual high of 13,293 points. The Nasdaq 100 Futures climbed to a high of 13,358, which means that it was just under the high of 01. May at 15,365. But at the upper limit of the sideways range at around 13,350 it was over for now. Since 30. March, the technology index mainly deals in a range between 12,960 and 13,350 points.
In order for the eruption to succeed on the top, the Nasdaq Futures must rise sustainably over the barrier. Then he could aim for the next mark at 13,420 and the zone at 13,565 / 615. An increase up to the course of the 16th. August at 13,732 would also be possible. However, it only becomes critical again when the index falls below 13,030 and then breaks the lower limit of the range. In this case, taxes up to 12,810, 12,737 or 12,678 are likely.
#Realestate: does the crash start from #Sweden?
Since interest rates have risen worldwide, real estate prices have been under pressure - this is especially true for Sweden
Since interest #rates have risen worldwide, real estate prices have been under pressure –, especially for Sweden. Real estate prices have been falling sharply there for months, now the larger landlord of commercial real estate is coming under pressure. Is that just the tip of the iceberg?
Because in the USA, too, the prices for commercial real estate in descending flight – are a problem for the US regional banks, which are already under pressure, and which have granted the most loans in this area. Morgan Stanley expects one for the American commercial real estate market bigger price drop than even in the financial crisis.
In #Europe, however, Sweden could be the first domino to fall in real estate! In Sweden, prices were in times of zero interest rates massively increased, now the crash threatens. Many Swedes only paid interest for years, but did not repay the loan at all – in anticipation of further rising property prices. The situation with commercial estate in Sweden is even more precarious.
Sweden: Real estate crisis worsens – Focus on commercial real estate
The financing terminal in parts of the Swedish real estate sector is escalating. One of the country's largest commercial real estate rental companies, SBB, has announced that it will suspend its dividend payment after downgrading its credit rating to the high standard level. He also canceled a planned capital increase with which he wanted to strengthen his balance sheet. Bloomberg reports that.
The share price of #Samhallsbyggnadsbolaget i Norden AB fell on Tuesday by up to 9.5% to the lowest level in five years. There had already been a 20% price slide on Monday after the rating agency S&P Global Ratings had lowered the SBB credit rating to the high standard level.
#SBB announced on Tuesday night that the market reaction had thwarted a planned subscription rights issue for young shares in the amount of 2.6 billion crowns ( 233 million euros ) and that real estate would therefore be sold, to strengthen liquidity. It also announced that the dividend would be postponed.
SBB is symptomatic of a major problem in the Swedish real estate industry. The equivalent of around EUR 37 billion is due in the next five years, a quarter of which is due this year. They are therefore also considered an early warning signal for the European real estate sector in general, because a large part of their debts have short-term and variable interest rates.
Arctic Securities AS welcomes SBB's plan to improve its liquidity situation. “ These two decisions, the suspension of the dividend payment and the cancellation of the planned issue of D shares, are generally positive for SBB shareholders ”, said real estate analyst Michael Johansson. “ The problem for SBB is that the dividend has already been decided by the general meeting, so their only option is to suspend it. ”
Sweden's largest landlord is fighting with a debt burden of the equivalent of more than seven billion euros. The downgrading and the stock collapse are also blows for CEO Ilija Batljan, who has repeatedly assured investors that he would take action, to defend the company's first-class rating in the face of rising interest rates and increasing investor fear of the sector.
Danske Bank A / S sees the canceled share issue as a “ sign that #SBB currently has no access to the capital markets ”. This increases the refinancing risks.
Real estate prices in Sweden: Descent continues unabated
Swedish real estate prices continued one of the worst descents in the world, which could be further fueled by the interest rate hikes, which have not yet become fully effective.
Home prices fell seasonally adjusted by 1% in April, led by the drop in single-family house prices, according to SBAB data published on Monday. This follows a decrease of 0.
8% in March.
The data were released after the Swedish central bank announced a half-point increase in interest rates to 3.5% last week and forecast a high of 3.65. Since most Swedish mortgage rates are only set for three months, it will take some time for the Riksbank's latest move to fully affect borrowers. The state lender therefore assumes that the trend that can be observed in Canada and Australia, among others, will continue as mortgage costs continue to rise.
Sweden's house prices will continue to fall, not only the Swedish central bank warns:
„ We expect prices to continue to fall in spring and early summer, especially if the recent increase in Riksbank has been fully incorporated into mortgage rates “, SBAB chief economist Robert Boije said in a statement.
The weakness of the real estate market, which according to SBAB has so far led to an average loss in value of 16% for single-family houses, is weighing on the Swedish economy. It also means problems for the construction sector, which accounts for around 11% of Swedish economic output. In the first four months of the year, the number of bankruptcies in the construction industry rose by 29%, according to data published by the credit agency UC on Tuesday.
China's trade with the United States and Europe continues to collapse
China: Lousy import numbers – global recession likely
The western financial markets are reacting with falling courses on the extremely weak data on the import of China – because this has made a global recession more likely.
One thing is also becoming increasingly clear: the recovery in China is much weaker than expected, the Middle Kingdom cannot fulfill the function of the growth locomotive for the global economy even after the lockdowns have ended.
China is facing declining imports and slower export growth, which is clearly clouding the country's economic outlook. China's trade with the United States and Europe continues to break in, which suggests either a sluggish economy up to the recession or a further progressive decoupling with China – or both.
Either way: the miserable import data show a massive weakness in demand in China – because the decline in China's imports of -7.9% compared to the same month in the previous year is dramatic in that regard, when large parts of China were in the lockdown at the time! So now, despite the end of the lockdowns, imports continue to fall.
China: Significantly shrinking imports, slower growing exports
China's imports shrank significantly in April, while exports rose at a slower pace. This development reinforces the signs of weak domestic demand despite the lifting of COVID restrictions and puts additional pressure on the economy, which is already struggling with slower global growth.
Compared to the previous year, imports into the second largest economy in the world fell by 7.9% after having already decreased by 1.4% in the previous month. Exports, on the other hand, increased by 8.5%, which means a slowdown compared to an increase of 14.8% in March, as stated by the customs authority's data on Tuesday emerges.
In a survey, economists did not expect growth in imports, while an increase of + 8.0% in exports forecast had been.
Government officials have repeatedly warned of a „ difficult “ and „ complex “ external environment.
However, the significant deterioration in trade flow in the past month will only increase concerns about foreign demand and the risks to the domestic economy, especially against the background of the weak recovery compared to the previous year, when imports and exports were severely affected by the COVID 19 restrictions in China.
The decline in imports suggests that the global economy can no longer benefit greatly from China's domestic growth engine. At the same time, it is also increasing the extent of the weakness of some important trading partners such as Vietnam as a sign of a global recession.
According to analysts, the drastic monetary tightening measures of the past 12-18 months and the recent burdens in the western banking sector are worrying both China and the global economy about the recovery prospects.
China: Declining exports to the United States and Europe
Exports to the United States decreased -6.5% year-on-year to $ 43 billion in April, while imports fell -2.9% to $ 13.3 billion. China's trade surplus shrank by -7% to $ 29.7 billion.
Trade with Europe also declined. Exports to the European Union decreased by -17.7% in April to $ 44.7 billion in April. Imports also shrank by -38.6% to $ 23.4 billion. At the same time, China's trade surplus with the EU grew by + 31.5% to $ 21.3 billion.
Deliveries to ASEAN slowed to + 4.5% in April, compared to + 35.4% in the previous month. The region is China's largest export partner.
Declining imports of important raw materials indicate a waning economy
China's coal imports also declined in April after reaching their highest level in 15 months in the previous month. This indicates a decline in economic demand. Imports of copper, an indicator of global growth and natural gas, also declined during this period.
Overall, the data again paint a mixed picture of the economy in China. The recovery is further slower than hoped. The consumption that Xi Jinping wanted to establish as the second pillar of the economy with its „ inner cycle “ does not really start. Europe and the United States take less goods, and that is the end of it decoupling continue – either because the economy is weak, or because it is politically wanted.
China continues on its way and finds other sales markets. The latest official purchasing manager index for manufacturing in April showed a significant contraction of the new export orders, which illustrates the challenges, Chinese decision-makers and companies are facing each other in the hope of a robust economic recovery after COVID.
Disclosure according to § 80 WpHG for possible conflicts of interest:
The author of this publication declares that he can be invested in any of the financial instruments mentioned, analyzed or commented on at any time. This may result in a conflict of interest. However, the author assures that he has prepared every analysis and every market comment in compliance with journalistic due diligence, in particular the obligation to report truthfully as well as the necessary expertise, care and conscientiousness.
Note
Recession in the United StatesWill the recession in the US – if it is actually rolling – significantly reduce the demand for oil, which could justify the already falling oil price? Well, on Friday at 2:30 p.m. they showed US labor market data for April: The US unemployment rate drops to 3.4% ( forecast 3.6% ). And: 253,000 new jobs were created in the USA in April ( Forecast + 180,000 ). So the US economy is running more robust than many analysts thought. Does that mean for the oil price? Possibly oil demand will continue to be at a higher level, which the futures market immediately priced in. Since Friday at 2:30 p.m. we have seen an increase in American WTI oil of $ 2.
Note
Nasdaq: Big Tech stocks are increasing – but indices are not, why?Big Tech stocks from the Nasdaq Alphabet, Microsoft and Meta rose sharply after submitting their quarterly figures –, but the US indices of Wall Street no longer rise. The exception was the Nasdaq yesterday, but that was only due to Microsoft, which gave the index + 114 points, while the index itself only gained a total of 81 points – without Microsoft, the tech index would also have fallen. But why are the US stock markets not increasing despite the increase in large tech stocks? Because the markets are finally accepting that a recession is coming and the best is already behind us. The Usm rates remain stable – but the margins are significantly weaker: these are clear signs of an economic downturn.According to the actually sobering numbers of Meta ( share, + 11% ), it is Amazon's turn today to number three in S&P 500 by weighting..
Note
Inflation: Companies rely on the principle „ Price before quantity “The current reporting season in the USA has confirmed again what has emerged everywhere in the past few months: the companies are relying on a new strategy. Instead of increasing sales figures, they are now increasingly relying on higher prices in order to achieve their sales and profit targets. This affects almost every industry. From car manufacturers to hoteliers, more and more companies are foregoing sales volumes in favor of higher prices. Sometimes they do this on purpose, sometimes they have no choice. So far, the strategy has worked, as the predominantly good quarterly figures show. Consumers still seem to ignore the high inflation ( ) and are still willing to pay the higher prices. This dynamic makes it harder for the Fed to fight inflation,and she could also be for others Central banks prove to be a problem.
Price increases as a driver of inflation
If one goes according to the statements in the recently published quarterly reports, the companies will not move away from the principle “ price before quantity ”. Already at the height of the pandemic, the strategy was the preferred choice in certain industries because the supply chains were significantly disrupted.
Example Ford: The carmaker maintains the higher sales prices, even if fewer cars roll off the assembly line. Example Marriott: The hotel operator increases room prices, especially for corporate customers. Southwest Airlines also relies on the principle: the airline achieves record sales in view of the limited flight capacity and keeps prices high. As the main vacation time is approaching, price power is not expected to fade, Bloomberg said.
With the US consumer price data for April, economists surveyed by Bloomberg expect inflation to remain unchanged at 5%. Before that, the inflation slowed down for nine months in a row. “ Inflation will prove to be far more persistent, pronounced and problematic for the US Federal Reserve in the summer than expected ”, says economist Samuel Rines, Managing Director at Corbu.
In the US automotive sector, new car prices are not far from their record values. The average monthly rate was $ 754 in March, almost one sixth of the average net income of US households. The surge in prices is likely to worsen as automobile manufacturers want to switch their fleets to more expensive electric models.
Inflation: pandemic aftermath
Already in the Corona pandemic, Ford and its competitors recognized that the serious chip bottlenecks also meant that you could make more profit with less produced cars.
For airlines, it is the lack of trained pilots and the backlog of new aircraft and spare parts that hinders sales. Southwest could have offered up to 8% more flight capacity in March if it had enough staff.
The capacity bottlenecks combined with the strong demand enable the industry to charge high prices, especially for transatlantic flights. The average price for a return flight to Europe is $ 1,032. This makes them 35% more expensive than last year and 24% more expensive than before the pandemic, as data from the Hopper rice search engine show. The figures suggest that international airfares will reach their highest level in five years this summer.
Companies support their profitability with price increases
The hotel industry has also adapted to the current consumer environment. According to market observer STR, US overnight prices rose by more than 10% in the first quarter, while occupancy only increased by around 6.
One reason for this is the changed demand mix: Leisure travelers have returned faster than customers than business travelers, which focuses demand on weekends. However, the owners have gotten used to operating hotels with lower occupancy but also lower cleaning costs.
“ The pandemic has lost a lot of staff, but has also gained a lot of pricing power ”, says Jan Freitag, director of the hotel analysis area at CoStar.
The producers of consumer bulk goods also put margin on sales: the Kimberly-Clark Corp. from Dallas, Texas, which produces Kleenex towels and toilet paper, increased prices in all categories by 10% in the last quarter. In view of this, sales decreased by 5. However, the gross margin rose to 33% from around 30% a year ago.
“ Therefore, when the price of toilet paper rises, you generally do not go to the toilet less often, do you? ” CEO Michael Hsu said at last month's press conference.
Rines notes with investors the expectation that companies will support their profitability with price increases. “ Companies do it everywhere, that's clear to see ”, he says. “ And if companies can't do it, they will be put under pressure. ” On the other hand, there is a risk of being attacked by consumers or politics.
Diana Gomes of Bloomberg Intelligence still sees the gross margin of the consumer goods companies she observes below the 2019 level. This suggests that the price increases so far only offset the increases in raw material and supply chain costs.
With a view to the fight against inflation, prices for travel and hotel accommodation for the Fed represent the biggest problem.
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Allianz chief economist warns of the risk of a new “ financial accident “According to the chief economist of the alliance, there is a risk of new "financial accidents". It's about heavily debt-ridden financial markets.
What have you seen? From 2007 it was the US real estate market that US financial crisis 2008 triggered. Then there was the Euro sovereign debt crisis, then 2020 Corona crisis, then inflation, and then the Ukraine war. Again and again there are events that are not foreseen by the general public and also by the broad mass of „ experts “, or that simply cannot be foreseen ( see Corona ). The higher inflation was very well forecast by some of the analyst and economist community. And so it is today with a view to possibly further upcoming „ financial accidents “.
Will there be further breakdowns at US banks? Has this crisis been going on for two months? Crashen numerous overly committed Hedge funds, who gamble fully on credit? Do securitized loan packages for company takeovers collapse? Is the commercial real estate market collapsing? This is a danger, especially in the USA. In the opinion of the chief economist of the alliance, investors in the financial markets should be prepared for months of market adjustments, which are overshadowed by the risk of a new “ financial accident ”. “ We have all the ingredients for a so-called Minsky moment ”, so Ludovic Subran explained it today at Bloomberg TV. The economist Hyman Minsky had described situations in which heavily debt-ridden financial markets suddenly collapse. “ You can see that everywhere, these liquidity pools or liquidity bottlenecks are slowly becoming visible. ”
Since the Regional bank crisis in the United States others have already expressed themselves in this regard. Subran's remarks, however, underline that the circumstances that led to the panic of investors in bank stocks in the United States and in Europe collapse that Credit Suisse ushered in, did not disappear. “ Of course, commercial real estate and the vicious circle with regional banks in the United States are worrying ”, he said. “ I am concerned about the incorrect assessment of corporate credit risks — especially if you look at it, that high interest rate risk premiums are still too small to be honest. For me, the focus is also on financial intermediaries outside the banking sector. ”
In addition to the current tensions, the global monetary policy turnaround has led to aggressive interest rate hikes ( see ECB and Fed), says Subran, who previously worked for the World Bank and the French Ministry of Finance. However, there is more to it. “ The very abrupt tightening is a problem for everyone. But there is also the level of wrong risk management. A new financial accident could come from the banking sector, but also from some hedge funds ” that specialize very heavily in commercial real estate. But there is also a problem that arises from a mixture of these two factors.
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Why Apple is making the US debt more expensive!Apple is currently making US debt more expensive. But how is that possible: what does Apple have to do with US debt?
Now – Apple wants to issue bonds and raise money with them. That is exactly what the state of the USA does. But Apple is perceived as an extremely safe haven, the company has massive cash reserves and a profitable operating business.
The US state, on the other hand, is constantly making losses, tax revenues have decreased, while US politicians are currently raising the debt limit (Debt limitwrestle ). If this debt ceiling is not raised, there would be a default –, so bondholders would not be served. This in turn could lead to a rating downgrading of the USA and thus further make debt borrowing more expensive.
Apple makes US debt more expensive
The result: because Apple announced today that it will launch bonds, it is a competition for US bonds. Since Apple is a „ thick fish “ as the company with the greatest market capitalization, the market now assumes that other large US tech companies ( such as Microsoft ) will take this step. So if you want to invest your money safely, you now have good competition for American government bonds – because Apple or Microsoft, for example, could go bankrupt in the near future, is not very likely.
With Apple's announcement that it would launch its own bonds, yields on US government bonds rose significantly: the 10-year US bond yield climbs from 3.42% to 3.50% – in a few minutes a very big movement in a very short time!
Apple Inc. sells bonds on the US first-class bond market on Monday as a flood of borrowers tries to before publication important inflation data to raise cash later this week. Bloomberg now reports details.
According to a person familiar with the matter, the $ 5 billion deal is expected to be in up to five different bonds. The longest term bond of 30 years could pay 135 basis points above comparable government bonds, the person said.
„ The transaction will be very well received by the market “ because we have seen a great demand for high quality fixed income securities “, said Rob Waldner, Chief strategist for fixed income securities and head of macro research at Invesco, on Bloomberg TV.
Bloomberg- surveyed traders expect sales of high-quality US corporate bonds worth $ 30 to $ 35 billion this week as corporate bond markets show signs of stabilization. For Apple, it is the first bond sale since the sale of $ 5.5 billion to finance buybacks and dividends in August.
Up to 15 debtors could sell their bonds on Monday to secure financing before the publication of the data on the consumer price index and the producer price index on Wednesday and Thursday.
Apple bond sales proceeds will be used for general corporate purposes. This could include share buybacks, dividend payments, working capital, capital expenditures, acquisitions and debt repayment, the person said.
An Apple representative did not immediately respond to a request for comment.
Apple is the second mega cap issuer to sell bonds after the profits are announced. Facebook parent company Meta Platforms Inc. raised $ 8.5 billion in its second bond sale last week.
FMW / Bloomberg
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USA: Debt ceiling – Loss of credit insurance costs explodeUSA: Demand for credit default insurance is increasing
The mess has skyrocketed demand for euro-denominated US credit default swaps that are traded the most. These contracts for a default next year were traded on Wednesday at 166 basis points. They reached a record high and exceeded the levels reached during previous unrest over the US debt ceiling in 2011 and 2013.
Trading has picked up momentum due to the peculiarity of the derivatives market, which enables owners to achieve substantial returns in the event of a default. Your payment corresponds to the difference between the market value and the nominal value of the underlying asset – an attractive investment if long-term government bonds are traded particularly cheaply. According to Bloomberg calculations, the potential payout could exceed 2,400.
Emerging markets would be most affected
According to Simon Waever, an analyst at Morgan Stanley, the outstanding net nominal volume of US CDs with $ 5.5 billion is now comparable to many larger emerging markets. Ironically, emerging markets will be most affected by any impact on the overall market.
The anomaly is limited to one-year CDS. Five-year contracts, which are usually more liquid and better reflect the assessment of a country's longer-term credit risk, have also increased in the United States, but are still traded about 100 basis points below the one-year terms. This reverse curve indicates that the risks in the immediate future are considered to be higher than in the longer term.
The CDS price reflects the cost of insurance for a very large loan in a very small insurance market, said Charles Diebel, head of Fixed Income at Mediolanum International Funds
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What is the debt ceiling?The federal government operates in a deficit, spending more than it brings in with taxes, so it’s forced to borrow money to pay for everything from the salaries of armed forces and federal employees to Social Security
Congress has the power of the purse strings, letting it set a limit on what the government can borrow to pay for expenses (the debt ceiling). The current limit is $31.4 trillion.
What happens if the debt ceiling is not raised or suspended?
When does the U.S. hit spending limit?
How many times has the debt ceiling been raised?
How much has the U.S. debt increased in the past 20 years?
What caused the debt?
What is the debt ceiling?
The federal government operates in a deficit, spending more than it brings in with taxes, so it’s forced to borrow money to pay for everything from the salaries of armed forces and federal employees to Social Security
Congress has the power of the purse strings, letting it set a limit on what the government can borrow to pay for expenses (the debt ceiling). The current limit is $31.4 trillion.
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What happens if the debt ceiling is not raised or suspended?Treasury Secretary Janet Yellen has said that a failure to raise the debt ceiling would result in “economic chaos,” saying a “steep economic downturn” would hit the U.S..
If the limit is not raised or suspended, no one knows exactly what will happen. Economists beyond Yellen note it could well result in a global financial crisis. In the U.S., a debt default could impact several groups, including:
Social Security recipients: Payments could be delayed in the event of a default, though the program’s trust fund could possibly avoid that.
Federal employees/veterans: Over 2 million civilian workers and 1.4 million active-duty military personnel might see their paychecks delayed—and veterans who receive disability payments and pensions could be affected as well.
Borrowers: If you think mortgage and credit card interest rates are high now, wait until a default. Those percentages are based on Treasury yields, meaning they’d likely spike beyond what they have due to Federal Reserve rate hikes. It will also be harder to get approved for a loan for many people who need loans.
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When does the U.S. hit spending limit?It already has. The government hit the limit on Jan 19, but the Treasury Department began using “extraordinary measures” (accounting tools at its disposal) to keep paying the bills. Yellen has said that even with those, the U.S. will run out of money by June 1.
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How many times has the debt ceiling been raised?Since the 1960s, there have been roughly 80 deals to raise the debt ceiling or suspend the borrowing cap.
How much has the U.S. debt increased in the past 20 years?
The U.S. actually had a budget surplus during the Clinton era, but after 9/11, expenses began to rack up. The Great Recession of 2008 made things even worse, then the pandemic saw the deficit explode. In the last 20 years, U.S. debt has increased nearly 400%.
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What caused the debt?The U.S., for most of its history, has run a deficit, but in the past several years, expenses tied to the pandemic, the wars in Afghanistan and Iraq and the costs associated with an aging population have caused the spending to spike. Tax revenue has not kept pace, in part due to tax cuts by previous administrations.
The biggest expenses are things like Social Security and Medicare, which are considered “mandatory spending” (in that they do not need to be approved every year). Among discretionary expenditures, which makes up about 30% of federal spending, military spending is the biggest contributor.
Finally, there’s interest. Rates have been low in recent years, much as mortgage rates have, but as the Federal Reserve has increased interest rates, the U.S. has owed more on its interest payments, which now are around 6%. During the last fiscal year, the government spent more on interest payments than it did on transportation, housing or food and nutrition services combined.
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AMZN down
Unusual Put Option Trade in Amazon (AMZN) Worth $17,212.50K
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Ahead of recessionNote
Why Say Recession at All Given How Much Inflation Has Come Down Already?Because when you dial into the Fed statements over the past several months, they believe anything short of recession will not truly stamp out the flames of inflation. If they just slow down the economy to touch their 2% inflation target, they fear that the remaining embers could reignite higher inflation in the months following.
So, under the heading “Don’t Fight the Fed” probably best that we take them at their word that a recession is coming. And when it is finally on the scene, that is when bears will take charge and stocks will retrace to the previous low of 3,491...and probably lower.
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Shifting TrendsCrude oil was a bigger contributor to inflation in the 1970s, when it was used much more intensively per unit of economic output. Back then, the U.S. economy consumed more than a barrel of crude per $1,000 of gross domestic product. By 2015, that had dropped to about 0.4 barrels per $1,000 of GDP.
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Reduced reliance on energy, and in particular crude oil, promoted disinflation, or the decline in the inflation rate.
Spot oil prices have retained a strong correlation to market measures of long-term inflation expectations, however.
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Some analysts have argued that the recent correlation between crude's diminished importance as an economic input and a lower inflation rate may no longer hold as oil is supplemented by less climate damaging but more expensive renewable energy sources and global supply chains give way to costlier domestic or regional sourcing.
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Goods Producers Pay the Price
Historically, oil prices have exerted more influence on the Producer Price Index (PPI), which measures the prices of goods at the wholesale level, than the CPI, which measures the prices consumers pay for goods and services.
Between 1970 and 2017, the correlation between oil prices and the PPI was 0.71. That's much stronger than the 0.27 correlation with the CPI, according to the Federal Reserve Bank of St. Louis.
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"The weaker link between oil prices and consumer prices likely comes from the relatively higher weight of services in the U.S. consumption basket, which you’d expect to rely less on oil as a production input," according to the St. Louis Fed.
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The Federal Reserve's preferred inflation measure, the personal consumption expenditures price index, has a lower gasoline weighting than the CPI.
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Is Inflation Good or Bad for Oil Prices?
It depends on the time frame. In the short term. higher inflation tends to lead to higher oil prices. In the longer term, if the Federal Reserve raises interest rates and slows economic growth to control inflation, oil prices could decline as a result.
What Type of Inflation Would Be Triggered by an Increase in Oil Prices?
Oil prices have historically had a greater impact on the Producer Price Index (PPI) than on CPI. PPI measures the price of goods at the wholesale level.
What Other Factors Can Cause Oil Prices to Rise?
In addition to the demand for oil to produce a host of products plus its use by the transportation industry, other factors that can cause oil prices to rise include geopolitical tensions, tight supply, and growing economic strength.
The Bottom Line
While the price of oil has historically correlated with inflation, that relationship has become less pronounced since the 1970s. The loosening of this correlation is likely a result of the growth of the service sector which uses energy less intensively than manufacturing.
Since oil is a key input in manufacturing and a major cost factor in shipping, oil prices have tended to have a greater effect on the cost of goods than services, which also explains the relatively weak correlation between oil and CPI and the strong one between crude and PPI.
Trade closed: stop reached
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