Reuters Insider - Inside the News: Chicago PMI at 22-Year High
13/06/2016 11:04
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Source: Thomson Reuters
Description: U.S. Midwest manufacturing data hit a 22-year high
and breaking news on pending home sales for
November.
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Transcript (May be auto-generated)
Time to go Inside the News at 10AM. First, some breaking economic news. Pending
home sales for November come in up 3.5%. A Reuters poll is expecting gains of
just 2%. It's been a heavy morning for economic data. Just a few minutes ago,
the Chicago PMI showed manufacturing in the Midwest was better than expected.
The PMI rose to 68.6 versus estimates for a drop to 61. It is the best reading
since July 1988. And initial jobless claims fell to 388,000 last week.
Continuing claims rose a bit more than expected. For more on the numbers, I'm
joined by IFR Managing Economist Jeoff Hall. Jeoff, very interesting data points
today. The jobless number looks good at least for the latest week. But that
manufacturing number, considering we've had such strength in that area all week,
is intriguing. And I should also point out new orders coming in above 73, also
better than expected. Doesn't that bode well for the future? Yeah all the data
points that we've seen this morning have been strong, stronger than expected.
The Chicago PMI doesn't have as good a correlation with the national
manufacturing, the ISM index, as good as say, the Philly Fed, the Empire State
or the Kansas City Fed index. But we'll take it. It's a 22-year high. Production
was much higher than expected, new orders much higher than expected, employment
higher than expected. So the only caveat to this outlook is prices paid which
also are on the boil. If those start to show inflation and a rise in inflation
expectations, that could shift the timetable for the Fed. Quickly Jeoff, on
continuing claims, you discouraged that we did see those tick up. Yeah, you know
we're looking at the 4-week average, both on initial claims and continuing
claims. Both are in irrefutable downtrend so this last week it's, remember
continuing claims are reported with a one week lag. So we're not totally
dismayed by the slight rise in continuing claims. They are in a downtrend, we
are looking for them to start ticking below consistently the 4 million mark in
2011. Alright Jeoff, thanks so much.
Terms of how US markets reacting to this data, fairly quiet actually on the
stock front. You can see markets adrift here in the second to final last trading
day of the year. Bonds giving up some of their gains after Wednesday's rally.
The 10-year treasury is yielding 3.38%. The EIA will be releasing energy
inventory data within the next hour. Reuters estimates are looking for a
drawdown in natural gas, crude and distillates with a build in gasoline stocks.
Reuters Commodity Specialist Christopher Henwood says all eyes will be watching
for confirmation of the API report yesterday which showed a surprise build in
crude inventories. Henwood says the bearish report could send oil below $90. In
other commodity news, copper prices hit a record high for a second day in a row
and that's helping some producers. Peruvian miner Southern Copper saw its CDS
spreads tighten by over 7% on Wednesday. That's the biggest improvement in
credit among companies trading in the US according to Thomson Reuters credit
news. Insider Equities Analyst John Kozey points out a bullish wedge pattern in
the chart and is calling for a breakout to all-time highs. But he warns that at
40% above its 200-day moving average, Southern Copper might correct before
heading higher. Coming up at 12:30, Breakingviews Editor Rob Cox tells us why
Apple stock is still cheap despite its 50% plus rise this year. Then at 1:30,
First Round Capital's Phin Barnes discusses his transition from sneaker
developer to venture capitalist. I'm Rhonda Schaffler. This is Reuters Insider