Aurelia Butler

The average new home price across 100 cities rose 0.25% on month in May, following a 0.27% gain in April, the data from real estate researcher China Index Academy showed on Saturday. China’s property sector, a pillar of the economy, has lurched from one crisis to another since 2021 after a regulatory crackdown on high leverage among developers triggered a liquidity crisis. The government is struggling to boost home sales or increase liquidity by taking a series of stimulus and easing measures. China announced “historic” steps in mid-May to stabilise the sector, with the central bank easing mortgage rules and facilitating 1 trillion yuan ($140 billion) in extra funding, and local governments committing to buying apartments. Investors hoped the measures marked the beginning of more decisive government intervention to boost homebuyer demand and slow falling prices. “After the implementation of the new policy, the number of visits to some core city projects has increased, but it will still take time from the increase in house viewings to a pickup in transactions,” said China Index Academy in the survey report. “Looking to the future, the pace of market recovery still depends on changes in residents’ income expectations.” More

NEW YORK/LONDON (Reuters) -MSCI’s global equities index staged an afternoon rebound on Friday as investors repositioned for month-end, while the dollar fell with Treasury yields as data showed a modest rise in U.S. inflation in April.After spending most of the session in the red, the MSCI All Country World Price Index turned positive ahead of a rebalance of the index. When Wall Street trading ended, the global index was up 0.57% at 785.54 after falling as low as 776.86 earlier. “When you get an upside reversal it’s always a good sign if you’re bullish,” said Joe Saluzzi, head of Equity Market Structure Research and co-head of equity trading at Themis Trading. He cited month-end portfolio adjustments for the late session buying. Before the market opened on Friday, the U.S. Commerce Department said the personal consumption expenditures (PCE) price index, widely seen as the Federal Reserve’s favoured inflation indicator, increased 0.3% last month, in line with expectations and the March increase, while core PCE rose 0.2%, compared with 0.3% in March.While some strategists said they were relieved inflation wasn’t hotter than expected, Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut said the data didn’t change much in terms of interest-rate expectations. “The core PCE this morning didn’t really do anything … It was just a status quo type of report so there is no indication that the Federal Reserve is going to be on hold longer, or going to cut rates sooner.” Separately the Chicago Purchasing Managers Index (PMI), which monitors the health of manufacturing in the Chicago region, fell to 35.4 from 37.9 last month and was well below economist expectations of 41. For the week, the MSCI index was showing its second consecutive decline but a monthly gain.On Wall Street, the Dow Jones Industrial Average rose 574.84 points, or 1.51%, to 38,686.32, the S&P 500 gained 42.03 points, or 0.80%, to 5,277.51 and the Nasdaq Composite lost 2.06 points, or 0.01%, to 16,735.02.Earlier, Europe’s STOXX 600 index closed up 0.3%. While the index advanced 2.6% for the month it fell 0.5% for the week in its second consecutive weekly decline.Data showed euro zone inflation rose more than expected in May, though analysts said it was unlikely to stop the European Central Bank from lowering borrowing costs next Thursday but may cement the case for a pause in July.In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.15% to 104.61 and was showing its first monthly decline in 2024 after the data. The euro was up 0.16% at $1.0849 but against the Japanese yen, the dollar strengthened 0.27% to 157.24.In Treasuries, yields fell after the signs of inflation stabilization in April, suggesting to some that the potential for the Fed to cut rates later this year remained intact.The yield on benchmark U.S. 10-year notes fell 5.1 basis points to 4.503%, from 4.554% late on Thursday whilethe 30-year bond yield fell 3.4 basis points to 4.6511% from 4.685%.The 2-year note yield, which typically moves in step with interest rate expectations, fell 5.2 basis points to 4.8768%, from 4.929% late on Thursday.On the energy front, oil prices fell as traders focused on Sunday’s OPEC+ meeting, which is expected to determine the fate of the producer group’s output cuts.U.S. crude settled down 1.18% at $76.99 a barrel and Brent settled at $81.62, down 0.29% on the day.Gold fell 0.68% to $2,326.97 an ounce on the day but was tracking for a fourth straight monthly gain. More

After the data, traders priced in about a 53% chance of a rate cut in September, versus about 49% before the report. The report showed the core personal consumption expenditures price index, which the Fed uses to gauge underlying price pressures, rose 0.2% in April from March, following a 0.3% increase the prior month. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased by 0.2%, down from a 0.7% rise in March.”The PCE data confirms price increases aren’t as sticky as feared, keeping hopes of at least one rate cut on the table,” said David Russell, global head of market strategy at TradeStation.The inflation data still shows price pressures remain above the Fed’s 2% target, with the year-over-year rise in the PCE index measuring 2.7% in April, the same rate as in March. Traders remained doubtful the Fed will cut rates more than once this year, with rate futures reflecting about a 45% chance of a second rate cut by year-end, compared with about 42% before the report. More

WASHINGTON (Reuters) -Price cuts by major U.S. retailers and new data showing a slowdown in consumer spending may boost the Federal Reserve’s confidence in falling inflation and take the edge off of corporate profits that have grabbed a larger share of national income since the start of the COVID-19 pandemic.Adjusted for inflation both overall consumption and disposable income dropped slightly in April. The Commerce Department had reported on Thursday that the U.S. economy grew more slowly than initially thought over the first three months of the year largely because of a lowered pace of consumption, a core prop of the economy that Fed officials feel needs to cool for inflation to return to the central bank’s 2% target.Inflation data released on Friday showed the personal consumption expenditures price index rose at a 2.7% annual rate in April, matching the gain in March. The Fed uses PCE inflation to set its 2% inflation target, while the “core” index stripped of volatile food and energy prices rose 2.8%, also the same as the month before.Policymakers have been worried that progress back towards the central bank’s inflation target may have stalled after a steady decline from the peak above 7% in June 2022.But while the headline numbers pointed to another lost month, there were signs of change. Core prices rose less than expected on a month-to-month basis, and the twin declines in “real” consumption and income confirmed the sense of an economy easing gradually back from a period of fast growth and price increases.”While American household balance sheets remain solid in our opinion, the margin for discretionary spending has been much thinner,” said Tuan Nguyen, an economist at RSM US, an observation that matched new data showing spending had slowed for things like recreational goods as consumers spent more for housing and utilities.”More likely than not, the economy is cooling down to a soft landing, which gives the Fed a reason to rethink its hawkish stance on keeping interest rates at a multi-decade high level … If we get more data like this in the coming months … we think the Fed should act sooner rather than later,” he wrote in an analysis of the new inflation and consumption report.The U.S. central bank is expected at its June 11-12 policy meeting to keep its benchmark interest rate steady in the 5.25%-5.50% range, where it has been since last July. Fed officials say the next move on rates will likely be to lower them, but not until they feel assured inflation will resume its decline to 2%. Investors expect an initial rate cut at the Fed’s September meeting, though by a slim margin.Policymakers themselves have been reluctant to commit, typically noting that as long as the job market and the economy overall remain healthy there’s no rush to lower interest rates, particular with aspects of inflation still troubling them. Some policymakers, for example, have looked beyond the headline inflation number to the share of goods and services where price increases still exceed 3% annually. In April, that remained around 55%, roughly double what it was before the COVID-19 pandemic.LANDSCAPE SHIFTChange may be coming. High-profile retailers like Target and Walmart (NYSE:WMT) have been cutting prices for food and other staples, with Walgreens this week saying in a price-cut announcement that the company “understands our customers are under financial strain.” Fed officials have said they feel consumers are in broadly good shape, with unemployment low and wages rising. But they’ve also noted signs of stress among lower-income households, including rising loan default rates and credit card borrowing.The price cuts announced this month may show that same sense developing in corporate executive suites and touching off the sort of dynamic Fed policymakers have anticipated: A fight for market share as pandemic-era pricing power wanes, along with the elevated profits that followed it.The data released by the Commerce Department on Thursday showed that even though earnings fell slightly, corporate profits continued to take an elevated share of the income earned by all workers and businesses combined.Corporations’ share of income climbed during the pandemic as snarled supply chains and pandemic-era transfer payments to individuals left home-bound consumers with money to spend on goods that had become scarce – a recipe for price hikes and higher margins. When pandemic restrictions were lifted and in-person events resumed, that surplus purchasing power shifted to travel, restaurants and other services – and inflation spiked there as well.Fed officials in recent weeks have said they think the landscape has shifted, with businesses generally saying their capacity to raise prices is diminished compared to the last two years. In the Fed’s most recent “Beige Book” collection of anecdotes about the economy, there was a widespread sense of consumers becoming more selective and putting pressure on firms.”Consumers are becoming more price-conscious, likely putting pressure on profit margins. We should expect more discounts and incentives as some consumers struggle with persistently high prices,” Jeffrey Roach, the chief economist at LPL Financial (NASDAQ:LPLA), said after the release of the Fed report. More

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Here is a look at what’s happening in markets in the coming week, from Ira Iosebashvili in New York, Swati Bhat in Mumbai, Yoruk Bahceli in Amsterdam, Anousha Sakoui and Amanda Cooper in London.1/COOL STORYIs the U.S. economy finally cooling? It will take several months of data to answer that question, but one key piece of the puzzle comes with the closely watched employment report out on June 7.Investors had been worried that an overly strong economy might prevent the U.S. Federal Reserve from lowering rates this year at all, or even require a rate rise. But those concerns were put to rest last month, albeit temporarily, by data showing slowing inflation and a cooling labour market.Still, policymakers have urged patience on rate cuts, saying they would like to see several months of data to be sure inflation is heading back towards their 2% target. The employment report could prove the economy is losing steam if it shows the slowdown in job creation has continued.2/BIG ELECTIONS, BIG CONSEQUENCESIndia’s six-week long national election is in its final stages, with votes due to be counted on June 4. Investors are gearing up for Prime Minister Narendra Modi securing a third term in office.    Markets see a Modi win as providing political stability and continuity in India to support sustained economic growth.     Indian equities outperformed most major markets in 2023 and are already trading at lofty valuations. They could get another boost if Modi remains in power, even as part of a coalition government.Mexicans also go the polls on Sunday, at which ruling party hopeful Claudia Sheinbaum could become the first woman president. The peso has sold heavily in the past week, as traders ponder the uncertainty for the economy stemming from the vote.3/IT’S A GAS, GAS, GAS    The oil market is entering into a sweet spot in the year – the summer driving season in the United States. The price of crude is up 10% year-on-year and intensifying Middle East tensions are keeping the market nervous.Meanwhile, gasoline futures have fallen by 7%, offering a potential boon to customers at the pump. But, U.S. gasoline inventories aren’t declining as quickly as they ordinarily would at this time of year, which suggests consumption isn’t quite hot enough to put a dent into supply. A measure of demand for immediate delivery of crude is also around its lowest since December.          A lot is riding on the outlook for growth and, therefore, demand for fuel. The world’s biggest oil exporters are expected to maintain their existing supply cuts at a meeting on June 2.4/UK FOR SALEBHP Group (NYSE:BHP) may have failed in its bid for Anglo American (JO:AGLJ), taking $49 billion out of bankers’ league tables. But the emergence of the bid in April highlights a revival in UK M&A.April saw 38 companies in the UK under offer, the most since June 2022, according to Peel Hunt. Take one away and that high-water mark doesn’t change.Bankers pinpoint that it’s companies driving the charge, and they expect more UK deals, as the interest rate outlook and economic backdrop stabilise and competition from private equity funds for assets is still muted.Driving the inbound interest is the persistent cheapness of UK assets. The FTSE 100 12-month forward price-to-earnings ratio continues to trade at the widest discount to the S&P 500’s since at least 1990, and lags the performance in the pan-European STOXX 600 and Germany’s DAX.5/CUT IT OUTThe ECB is all but certain to become the first major central bank to cut interest rates this cycle on Thursday. Policymakers have practically promised a June cut that is expected to lower the bank’s key rate by 25 basis points to 3.75%. So all focus will be on what hints ECB boss Christine Lagarde gives on what happens next. Inflation in the bloc’s dominant services sector remains sticky and its economy is recovering faster than expected, while a closely-watched wage growth figure accelerated last quarter, leaving the outlook beyond June less certain. Traders are still much more confident that the ECB will cut rates multiple times this year compared to its U.S. and British peers, though they have also reduced their bets on its moves.They now expect two cuts and less than a 50% chance of a third – compared with three when the ECB last met and at least five at the start of the year. More