10yr yields continue to hold around ~2.40% while US and China trade wars and more Brexit uncertainty continue to overshadow global equity markets.
Retail Sales for April came in down 0.2% month-over-month, missing the consensus call of +0.2%. Ex-autos came in +0.1%, missing the +0.7% forecast by economists, which is a significant drop from the 1.3% reading from March. The retail control group, which excludes autos, gas and building supplies, was flat in April, missing the forecast of +0.4% and suggests that consumption has started Q2 out on a weak foot. Of the thirteen categories in the index, only five rose, which is the lowest since December.
The NAHB Housing Market Index rose three points to 66 in May, beating market expectations of a reading of 64 and is the highest level in seven months. The regional breakdown in the Northeast saw a jump of ten points to 65, the Midwest came in unchanged at 56, the South up one point to 67 and the West rose three points to 74. The index has either increased or been unchanged for five months in a row, showing that the weakness seen in Q4 2018 is working itself out.
Housing Starts rose 5.7% month-over-month in April to 1.235 million, beating expectations of 1.205 million. The month-over-month growth in starts missed market expectations of 6.2% growth due to upward revisions to March, which was revised -0.3% to 1.7%. Single family starts increased 50k to 854k, a 6.2% increase. April building permits came in at 1.296 million, beating expectations of 1.289 million, coming in at 0.6% month-over-month growth. This was the first increase in building permits in four months. Housing starts by region, the Northeast was up 84.6%, Midwest was up 42%, while the South was down 5.7% and West down 5.5%. Overall a pretty solid report.
US/China Trade Wars
State run media in China indicated indifference to trade talks, claiming it is pointless to meet if the United States is not sincere. Vice Premier Liu He stated his three main concerns for a deal would be tariff removal, achievable purchase plans, and a balanced agreement. President Trump also declared on Wednesday a national emergency over threats against American technology. It is now expected to be followed up by a ban on US firms from buying 5G network equipment from Huawei and ZTE. Negotiations remain at a standstill.
Univ. of Michigan Consumer Sentiment
Consumer Sentiment has posted its highest level in 15 years, posting a 102.4 while expectations were way below at 97.2. All of gains in May came from the expectations index, which rose 8.6 points, the highest now since 2004.