- US Initial Jobless Claims declined to 409k vs 420k expected and 434k previously.
- Philly Fed declined to 3.9 in May vs 20 expected and 18.5 previously. While the New Orders index declined to 5.4 vs 18.8, employment increased to 22.1 vs 12.3. Much of the decline also appeared to come from decreases in the prices received and prices paid components.
- US Existing Home Sales decreased to 5.05mm vs 5.2 expected and 5.1 previously
- ECB said that it would not accept restructured Greek debt as collateral. Trichet reported walked out of a meeting hosted by Juncker that discussed “soft restructuring” for Greece. -FT
- Spain sold 3.22 billion euros of 10- and 30-year government bonds on Thursday. The average yield on the ten-year bond was 5.395% vs 5.472% the last time. The average yield on the 30-year bond was 6.002% vs 5.875% last.
- UK Retail Sales ex Auto Fuel rose 2.7% YoY in April vs 2.2% expected and 0.9% previously. CBI Trends data were also strong, with Orders improving to -2 vs -9 expected and -11 previously
- Australian Consumer Inflation Expectations declined to 3.3% in May vs 3.5% previously.
- Australian Weekly Wages rose 3.8% YoY as expected vs 3.9% previously
- Chanos was on CNBC today pitching his bearish China view again. He said that “The really scary thing is if you do the numbers and they cut back on construction it’s not a slowdown, and they go negative real fast.” "The fact of the matter is if they hit the breaks really hard, the economy goes into reverse. It doesn’t slow," Chanos said. "Nobody will say that publicly because it’s unbelievable. But it happens to be the way the numbers work."
But the contribution of Gross Capital formation growth to total nominal GDP growth has been even more skewed. In recent years Gross Capital Formation has been responsible for almost all of Chinese GDP growth:
This reinforces the importance of monitoring Chinese money supply trends. A tighter than expected contraction will likely have some pretty serious repercussions. Of course, Chinese officials are aware of this, which means that they will be watching money and loan data closely as well. This actually increases the likelihood of excessively easy credit for too long.
A final point: a Chinese contraction resulting from massive bad loans and a contraction of credit will mostly likely cause the Chinese government to use the only other easing option on the table: an RMB devaluation.
- The Indian Government has hired trained monkeys to guard its buildings from other monkeys. The interesting thing is that the trained monkey apparently earns more than 80% of Indians. This begs the question of why the government doesn’t just hire cheaper human labor instead? An entertaining, if probably misreported story.