The weight of inflationary concerns, interest rate hikes and possibility of economic slowdowns has Asian stock markets still under pressure. Overnight, the Shanghai index fell to a 4 month low and the Kospi, ASX, Nikkei and Sensex indices all dropped to 2 month lows. In Europe, Junker, the head of the European Finance Ministers, said a decision on Greece may come as early as next week. The Irish 10 yr is rising to a fresh high but Spanish yields, importantly, are lower. German consumer confidence fell to a 6 month low coming in a touch below expectations. In the US, the MBA said refi’s rose .9% to a 5 month high as mortgage rates remained very subdued coincident with the rally in US Treasuries and purchases were up 1.5% to a level slightly above the one yr average. The gauge of market sentiment, the II data, has the most amount of bulls expecting a correction (that they want to buy) since Feb ’10 while outright Bears remained subdued. Bulls 43 v 45.6, Bears 19.4 v 19.6, Correction 37.6 v 34.8
April Durable Goods were weaker than expected both headline and ex transports BUT March was revised higher, so taken together the data wasn’t much different from expectations. Non Defense Capital Goods ex Aircraft fell 2.6% vs the forecast of a drop of 2.1% but March was revised to a gain of 5.4% from 3.7% initially. Orders ex transports fell 1.5% vs an expected rise of .5% but March was revised up to a gain of 2.5% from the 1st report of up 1.3%. Another thing to note, because inventories rose by .9% as shipments fell by 1%, the inventory to shipments ratio rose to 1.80 from 1.76, the highest since Jan ’09. It is very possible though that the rise in inventories was a prudent response to the Japanese disaster and concerns with supply disruptions. Bottom line, the revisions to March did compensate for the April fall in orders and proves how volatile this data set is month to month. Thus, I’m not confident to make any firm conclusion with today’s April figure. With respect to manufacturing, the most important figure we await is next week’s ISM because of the moderating May regional manufacturing surveys we’ve seen thus far.
