Macro Roundup (Jun 28)

SHANGHAI, Jun 28 (SMM) – This is a roundup of global macroeconomic news last night and what is expected today.

Last night

The US dollar index went up 0.64% to 95.3 overnight, on track for its second day of gains as trade-related worries eased following Washington’s less confrontational approach to Chinese investment. The upbeat economic data released on Wednesday also accounted for the gains in the greenback.

US President Donald Trump said on Wednesday he will use a strengthened security review process to deal with threats from Chinese investment in US technologies instead of imposing China-specific restrictions.

Lead and zinc saw strong performance overnight, while other LME metals fell. Worries over growing supply saw tin lead the decreases with a loss of over 2%, to the lowest level in close to six months. Aluminium dropped over 1%, copper and nickel dipped.

SHFE metals rose across the board except for tin. Zinc recorded a gain of over 2%, while the runner up lead was up 1.6%. Nickel went up over 1%, copper and aluminium inched up slightly.

Profits at China’s industrial firms above a designated size rose 21.1% year on year to 607.1 billion yuan ($92 billion) in May, compared to the 21.9% growth in April. The jump was driven by price gains, falling production costs, lower leverage ratios, faster inventory turnover of products and stronger profitability.

In the first five months of this year, these companies saw their profits increase 16.5% from a year earlier, compared to a 15% increase in the January-April period. The profit growth was largely underpinned by heavy industry, including ferrous metals processing, chemicals, and oil and natural gas extraction.

US overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, dropped 0.6% month on month in May as demand for transportation equipment fell. That followed a revised 1% decrease in durable goods orders in April.

Business spending on equipment is buoyed by the Trump administration’s $1.5 trillion income tax cut package, which came into effect in January, but worries over the escalating US spats with trade partners may offset the fiscal stimulus.

US wholesale inventory rose 0.5% month on month in its preliminary May reading, after rising 0.1% in April, higher than the expected 0.2%.

The National Association of Realtors (NAR) said that US pending home sales index slipped 0.5% in May to 105.9, the second straight month of decline. This reflected a persistent shortage of available homes. On a yearly basis, pending home sales have fallen 2.8% before being seasonally adjusted.

“Realtors in most of the country continue to describe their markets as highly competitive and fast moving, but without enough new and existing inventory for sale, activity has essentially stalled,” NAR chief economist Lawrence Yun said in a statement.

Data from the Energy Information Administration (EIA) showed that US crude oil inventory shrank 9.89 million barrels over the week ended June 22, the largest weekly decline since September 2016, after decreasing 5.91 million barrels in the previous week. Meanwhile, refined oil inventory and gasoline inventory increased 15,000 barrels and 1.16 million barrels, respectively.

Day ahead

Key factors to watch today include eurozone economic sentiment in June, Germany consumer price index (CPI) in June, US personal consumption expenditures (PCE), gross domestic product (GDP), consumer spending in the first quarter and initial jobless claims over the week ended June 23.