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Authored by Charles Hugh Smith via OfTwoMinds blog,

You deserve a realistic account of the economy you’re joining.

Dear high school graduates: please glance at these charts before buying into the conventional life-course being promoted by the status quo.

Here’s the summary: the status quo is pressuring you to accept its “solutions”: borrow mega-bucks to attend college, then buy a decaying bungalow or hastily constructed stucco box for $800,000 in a “desirable” city, pay sky-high income and property taxes on your earnings, and when the stress of all these crushing financial burdens ruins your health, well, we’ve got meds to “help” you–lots of meds at insane price points paid for by insurance– if you have “real” insurance without high deductibles, of course.

Here’s the truth the status quo marketers don’t dare acknowledge: every one of these conventional “solutions” only makes the problem worse. Student loan debt only makes your life harder, not easier, as the claimed “value” of a college degree is based on the distant past, not the present. The economy is changing fast and the conventional “solutions” no longer match the new realities. But don’t expect anyone profiting from the predatory profiteering higher-education cartel to admit this.

The high cost of housing isn’t “solved” by buying in at the top of an unprecedented bubble. Buying into bubbles only makes the problem worse, for all bubbles eventually pop.

The “solution” to crushing levels of debt is not to borrow more just to prop up a rotten, corrupt, dysfunctional and self-serving status quo. In effect, the young generations are being groomed to be the hosts for the parasitic classes that feed on young taxpayers, student loan debt-serfs, young buyers of bubble-priced housing, unaffordable sickcare “insurance” and all the rest of the status quo “solutions.”

As writer Peter Turchin has explained, societies in decline overproduce elites.Those promised an elite slot who are left out become the engine of social unrest.

The status quo claims that getting a college diploma more or less guarantees you a slot in the elite class of folks with secure incomes and opportunities to get ahead and build real wealth.

The reality is only the top 5% of the work force are doing well. So of the 33% of the work force with university diplomas, the system only creates slots for the top 15% of that educational elite. The next 15% (the rest of the top 10% of the entire work force) can pick up the 2nd tier technocrat positions and everyone else gets the scraps: insecure jobs, mediocre pay, limited opportunities.

Before you accept that becoming a debt-serf to get a college diploma is a “solution,” check out the other side of that trade: the mostly older, wealthier folks profiting from your debt-serfdom:

This parasitic predation is guaranteed by your federal government: you know, the institution everyone looks to for “solutions.”

How did millions of students earn college diplomas before the hyper-financialization of the economy and before assistant deans made $350,000 a year in “competitive” salaries? It’s a mystery lacking any mainstream explanation.

Speaking of debt–here’s the nation’s total debt level: note that the amount of debt required to push GDP higher keeps increasing far faster than GDP:

As for plunking down hundreds of thousands of dollars for that little cheaply constructed stucco/particle board/plastic box: housing prices in hot markets such as Dallas and Seattle have far exceeded the previous hyper-financialized housing bubble top in the mid-2000s:

Don’t worry about soul-crushing commutes, homeless encampments or rapidly rising taxes: asset bubbles make everything bearable, until they pop.

You deserve a realistic account of the economy you’re joining. Here’s reality: the vast majority of the gains reaped since your birth have flowed to the very top of the hyper-financialized wealth-power pyramid.

As Bucky Fuller noted in his famous dictum, “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

Rather than fight a system designed to strip-mine you for life, seek a model for your life that obsoletes all the perverse conventional “solutions.”

*  *  *

I’m putting four books on sale which may help provide an alternative context for your life-decisions.

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50% discount on An Unconventional Guide to Investing in Troubled Times

Kindle edition now $2.99, print edition now $9.95.

22% discount on Inequality and the Collapse of Privilege and Why Our Status Quo Failed and Is Beyond Reform

Kindle edition now $2.99, print edition now $6.95.

SUMMER BOOK SALE through June 30, 2018

*  * *

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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Stocks are sliding this morning on a familiar catalyst, in fact the same catalyst that has been blamed for most red prints in recent months: rising trade war rhetoric. But if the US has it bad, it’s nothing compared to the mauling that China has suffered in recent weeks: the Shanghai Composite is down from 3,559 on Jan 24 to close at just 2,859 on Monday, down 19.64% and on the verge of a bear market.

Today, SocGen’s Andrew Lapthorne also points us the surprising weakness in China, with the CS300 off 3.9% last week and down 10% so far in 2018, which he notes is in stark contrast to the Russell 2000, which has been among the strongest performing indices over the last three months.

Summarizing this divergence, Lapthorne writes that “if Trump’s ‘Trade War’ is about rebalancing the prospects of US companies versus, say, China, then markets appear very much on message. The Russell has outperformed the CS300 by a remarkable 22% since the beginning of April.”

What makes the divergence even more stark is that despite this weekend’s emergency measures by the PBOC, in which the central bank cut RRR releasing 700bn yuen into the financial system, Chinese stocks erased earlier gains overnight to close near session lows.

Or as one Bloomberg commentator summarized, “Judging by the year-to-date equity performance of Chinese and U.S. stocks, it looks like trade wars are easy to win...”

Or maybe not, and the divergence is merely a delayed reaction as US traders process what was painfully obvious to their Chinese peers: the “global growth scare” has been unleashed (by China as Nomura explained earlier), and sooner or later it will hit the US. Indeed, as Lapthorne points out:

“regular readers will know we are not keen on the Russell 2000 as corporate leverage is high and profits are struggling. So seeing the index fly up like that must have been painful for investors who were outright short. However, such a  strong performance does mean implied volatility on the Russell 2000 (RVX) has been relatively subdued versus its bigger cousins (VIX). If the ‘Trade War’ fades, then a reversal of this relationship could be on the cards.”

Backing off from the Russell and focusing on the broader US market shows emerging signs of stress:

The S&P 500 has also been doing well this year but, as has been well reported, of the 3.0% gain, around 2.5% can be accounted for by just a few FAANG stocks. However such, an analysis perhaps overstates the narrowness of the US market, as for every big winner there is often a big loser as well. For example, the un-weighted average YTD performance of today’s S&P 500 constituents is +3.4% and the equal-weighted index shows a total return of 3.2% versus a weighted return of 4.0%.

Lapthorne concludes that while the FAANG performance is impressive – if concerning – S&P 500 strength is broader than often reported. That said 3.0% is hardly blockbuster, but it is certainly enough to win the market “trade war” with China, where one more down day and the Shanghai Composite will enter a bear market.

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‘Safe-haven’ FANG stocks are getting slammed this morning, extending Friday’s losses as China trade war rhetoric tamps down the market’s enthusiasm for piling money into no-brainer extreme multiple stocks…

 

This is the biggest drop in FANG stocks in almost 3 months…

 

 

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Following major disappointment in exiting-home-sales, May New Home Sales exploded higher, up 6.7% MoM (smashing expectations of 0.8% gain) helped by a major downward revision to April.

New home sales were flat or negative in 3 of 4 regions: Northeast: -10%, Midwest: 0%, West: -8.7%, but South soared from 347K to 409K annualized, a 17.9% surge, resulting in the 6.7% MoM increase

Perhaps the rebound in home sales was driven by the plunge in prices?

Median new home sale price dropped to $313k (from Dec highs at $343k) to the lowest since April 2017…

 

US Homebuilder stocks however, continue to track the macro trend weaker in US housing data…

 

 

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VIX has spiked above 16 for the first since since May as trade war concerns spark derisking across global stocks. While The Dow sank red for 2018 last week, Transports just joined them…

 

And with Dow Futs down almost 300, VIX is back above 16…

The highest VIX since May…

Treasury yields limped higher into the open but suddenly went bid as the US cash markets opn…

 

 

 

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When discussing how the current market has changed in the past year, Morgan Stanley’s cross-asset strategist Andrew Sheets said yesterday that one of the things that stood out to him at recent meetings with clients and conferences is that “China is rarely mentioned as a growth concern (after causing angst for much of this period).”

This could be a significant error in light of the PBOC’s recent confirmation – by way of Sunday’s latest RRR cut – that the Chinese economy has major problems, above and beyond the woeful performance of Chinese stocks in recent weeks, the blow out in Chinese bond yields for riskier companies, the surprising spike in corporate defaults, the record high and growing leverage and overall economic slowdown.

To be sure, much of China’s recent weakness has its genesis in what we noted earlier in the month, namely the sharp slowdown in China’s credit creation…

… as a result of the ongoing crackdown on shadow credit creation. 

In other words, it’s all about China’s credit impulse, once again.

As a reminder, two weeks ago we noted once again that according to most flow-tracking economists (and not their conventionally-trained peers) when one strips away the noise, there are just two things that matter for the global economy and asset prices: central bank liquidity injections, and Chinese credit creation. This is shown in the Citi charts below.

The biggest problem, of course, is that both are set to decelerate.

* * *

We bring up this lengthy intro because in his latest note, Nomura’s head of cross-asset strategy, Charlie McElligott, tackles the topic of the “global growth scare” which has gripped markets in recent weeks, and traces its origins not to the traditional market scapegoat, namely Trump’s trade rhetoric and actions, but a far more tangible concept: the collapse in China’s credit impulse.

Here is how McEliggott explains it in “Downshifting into a Growth Scare“

Tactical “risk (sentiment) downshift” message from last Monday’s note regarding the “market inflection” of the past month takes further hold, as the market trend deteriorates further and indicates a burgeoning “global growth scare”

• Clear signals of past month to “cut” directional “Cyclical Melt-Up” bets and get “tactical” / “market-neutral” grow even stronger last week / today, as we continue to transition into my expected “Financial Conditions Tightening” phase of 4Q18 / 1Q19—“risks” are accumulating and “red flags” are growing:
  • USTs / Rates rally further despite this month’s strong U.S. data and “hawkish hike” Fed, driving gradual covering in USTs from legacy CTA / trend ‘placeholder short’ positions
  • YTD Commodities rally (Classic late-cycle) now seeing “breakdown:” BCOM Total Return Index -5.1% over the past month / BCOM Industrial Metals TR Index -6.8% over the past month / BCOM Agricultural TR Index -10.5% over the past month
  • “Defensive” Equities now rallying powerfully over prior “Cyclical” leadership, while too we see MTD reversal in “Value” outperforming “Growth” as further signal of this very “late-cycle” market shift / rebalancing / rotation
  • QE-era “easy carry” plays such as Emerging Markets see further redemption unwind pressure, with largest EEM outflow ever last week (-$3.0B) and a -3SD sale of MSCI EM Equities futures by Asset Managers and Leveraged Funds (-$2.8B)
  • “Quant Insight” macro factor PCA model too picking-up on this “regime change,” with 9 of 18 “major markets” –tracked no longer “explained” by their prior macro price-drivers—previously a reliable signal of a potential “volatility event” over next 1-2m
  • Away from market-based indicators of said “risk (sentiment) downshift,” recent “dovish” policy pivots from the ECB and PBoC too signaling “growth downgrade”
• PBoC “easing” moves looking increasingly “frantic”: just this morning, they have 1) cut the SME loan relending rate, 2) made SME loans eligible as MLF collateral and 3) increased the SME loan relending quota to promote small businesses—all on top of 4) this weekend’s “as expected” RRR cut—and still we see Chinese (& Asian) equities sold overnight
• Chinese Equities looking increasingly as “patient zero,” with a double-whammy “growth scare” into the larger “QE to QT” regime shift: Shanghai Comp -9.8% QTD, Shenzhen Comp -14.4% QTD, Shanghai Property Index -8.1% QTD
• Chinese Yuan as another proxy for this “regime change”: the largest 8d weakening in offshore CNY vs USD (3.1 Standard Deviation move) since the “devaluation” shock of Aug ’15 -> PBoC is using the Yuan as their “weapon of choice” in the “tit-for-tat” of trade war rhetoric
• An escalation of / persistent weakening in the Chinese Yuan has potential to trigger a global “disinflationary impulse” via the supply-chain and contributing to further USD upside as a headwind to EM, Commodities and U.S. growth
• Asian EM “bleeding,” as “trade war” and overall “growth scare” impacts the psyche and drives “outflow” concerns: CNY, IDR, TWD, KRW and THB are the five worst-performing EMFX tracked by Bloomberg globally over the past week
• EM Equities underperformance analogs (especially vs Russell 2000) run by my colleague Anthony Antonucci speak VERY negatively over the next 6m period for both EM Equities and U.S. Small Caps, where using the current NDUEEGF underperf vs RTY (-18.2% over the past 3m) is a 1%ile return; prior -15.0% over 3m underperf analogs shows on average an EM Equities return of -7.3% / a RTY return of -5.2% over the following 6m period, respectively
• Market consensus now utterly focused on 2020 as U.S. “recession year,” with enormous interest from Cross-Asset / Macro funds in forward “Curve Cap” trades (reach out to set up a call on our favorite trade expressions)
• These curve options play for a “risk-off” UST curve STEEPENING due to inevitable U.S. economic deceleration (plus diminishing “half-life” of late-cycle U.S. fiscal stimulus) which would see FOMC normalization efforts pivot to “easing,” due to the impacts of recession and the much larger “secular stagnation” theme

COMMENTARY:

As noted in last Monday’s critical “phase shift” note, “signals” are accumulating which are indicative of the choppy transition in my “Two Speed Year” thesis: it seems that we are in the midst of the move from the “Cyclical Melt-Up” phase 1 to the “Financial Conditions Tightening” phase 2.

It is increasingly clear to me that China is the source of the this “new front” in the negative “QE -> QT” transition, as it seems we are in the midst of a good old-fashioned “growth scare” on top of the complications of tightening global financial conditions thanks to the Fed normalization efforts.  The driver is likely the multi-year “deleveraging” efforts by the PBoC, which in turn is now bleeding into weaker domestic- and global- growth & inflation data.  To my favorite “flow-chart”:

FADING CHINESE “CREDIT IMPULSE” AS THE CANARY BEHIND THIS “GROWTH SCARE”:

CHINESE 1s10s CURVE TOO INDICATING SAID “GROWTH SCARE” AND SIGNALING LOWER GLOBAL COMMODITIES

CHINESE GOVERNMENT BOND YIELDS SPEAKING TO “CATCH-DOWN” FOR EMERGING MARKETS EPS AS WELL:

As confirmation of the “growth scare” concerns, the PBoC’s “easing efforts” of the past few months are looking increasingly “frantic,” as the prior RRR cut (and small biz tax cuts, and MLF collateral rules easing) was escalated over the weekend in response to the total meltdown in Chinese Equities markets being experienced (Shanghai Comp -9.8% QTD, Shenzhen Comp -14.4% QTD, Shanghai Property Index -8.1% QTD).  This weekend’s RRR cut was far more powerful than the prior April-kind with regards to the liquidity injection it can drive via the ‘debt-for-equity’ swap program, which is designed to ease credit strains and boost small business. 

Nonetheless, Chinese (& Asian) Equities STILL sold off…so after the close, the PBoC announced FURTHER easing measures (as they go outright “kitchen sink” route), 1) cutting the SME loan relending rate, 2) making SME loans eligible as MLF collateral and 3) increasing the SME loan relending quota.  Geez.

But the most obvious “easing” tool for the PBoC looks to be the Yuan, in large part due to the escalation of “trade war” tensions.  The current 8 session weakening in offshore CNY vs USD (3.1 Standard Deviation move) is the largest since the “devaluation” shock of Aug ’15.  For this reason, we are seeing  a demand for equities index options downside trades, cheapened significantly by contingent CNY weakening (hit me for more details).

LARGEST WEAKENING IN YUAN SINCE THE PBoC SHOCK DEVALUATION OF AUGUST 2015

An escalation of / persistent weakening in the Chinese Yuan has potential to trigger a global “disinflationary impulse” via the supply-chain and contributing to further USD upside as a headwind to EM, Commodities and U.S. growth.  As such, we see that over the past five sessions, the five weakest EM currencies tracked by Bloomberg are Asian: CNY, IDR, TWD, KRW and THB.
 
This “rolling EM meltdown” is another expression of the “QE to QT” reality, as the “easy carry” environment of the post-GFC period now “coming home to roost” in the form of “skinny exits” for redemption flows.  Last week EEM saw it’s largest weekly outflow (-$3.0B) ever, while MSCI EM Equities futures also saw a monster -$2.8B outflow combined across Asset Managers and Leveraged Funds—a -3 standard deviation move.  For some context however on how much more “room to go” there is with potential EM “capitulation ahead,” look at this chart of the current outflow vs the 14 year inflow:
 
YOU ARE HERE—EM EQUITIES AND DEBT FUND FLOWS OVER THE PAST 14 YRS:

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Authored by Martin Armstrong via ArmstrongEconomics.com,

The Wall Street Journal just published a review of the Global Warming Forecasts for the past 30 years. They have not even come close to the scenarios they put forth back in 1988…

On June 23, 1988, the then NASA scientist James E. Hansen who helped to start all this nonsense testified before the Senate Committee on Energy and Natural Resources.

He stated that he expressed had a “high degree of confidence” in “a cause-and-effect relationship between the claimed CO2 induced “greenhouse effect and observed warming.” 

That is how government characterizes something when they are guessing – “high degree of confidence” which was the same words used to invade Iraq who had weapons of mass destruction. He later came out and said: “Simply stated, there is no doubt that Saddam Hussein now has weapons of mass destruction.” (August 25, 2002).

The CIA Director testified before Congress and said: “We said in the estimate with high confidence that Iraq had them.” see Transcript Washington Post).

Why does anyone EVER believe those in government? They cannot even forecast GDP accurately when they fudge the numbers.

Here is Hansen’s forecast.

The dark red overlay is actual surface temperatures reported and there is even a controversy surrounding them that they have been constantly skewed higher to not look like complete idiots.  Even the models devised by the United Nations Intergovernmental Panel on Climate Change, are at least twice the actual temperature by now even with fudged numbers. So why are all these model so exaggerated?

These models are completely VOID of cyclical models and they do not even understand that this is a cycle. They are constructed with same idiotic bases that whatever trend is in motion will remain in motion. The Dow Jones Industrials closed 1932 at 60.26 and 1933 at 98.67. That was a 63.7% gain year over year. By assuming that trend will remain in motion, which was his dire forecast, the Dow would have reach 96,433,885,025.00 by 1975. That makes 50,000 look cheap.

Even averaging a 5-year advance VOID of understanding cycles, fails to provide a valid forecast ever. If I take the closing in the Dow of 2009 and the closing of 2014, the average advance was 1479 points per year. Now take the 2014 closing of 17823.07, that gives me 25,218.09. That is fine because we have been in a bull market. We all know the cycle will change. That is what is wrong with the global warming forecasts.

What actually happened, they got $1 billion for research by scaring the HELL out of everyone. I wonder what kind of chart I should make to get $1 billion handed to me from Congress with no performance requirements. What a deal.

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As European officials struggle to do everything they can to save the WTO, which appears headed for an all-but-certain demise thanks to President Trump’s aggressive trade policies, EU leaders have apparently circulated an “internal memo” drafted by the European Commission that accuses the US of deliberately instigating the collapse of the global trade order, and warns of an upcoming “trade apocalypse.” In short, if this document is any guide, the trade war is about to get worse – as if Trump’s threat to impose 20% tariffs on all cars coming into the US last week wasn’t bad enough.

According to Bloomberg, the EU warned that the “rules-based system of international commerce” could revert to an trade environment where “the strong impose their will upon the weak,” the memo said.

Our world will go back “to a trading environment where rules are only enforced where convenient and where strength replaces rules as the basis for trade relations,” according to the memo.

The flirtations with a return to an environment of “mercantilist deals” have intensified as President Trump has been determined to narrow the trade deficit at any cost – even if the price is the collapse of the multilateral trade order.

Specifically, the memo, which was obtained by Bloomberg, spells out three complaints raised by the EU:

• Gaps in the rulebook of global trade “leading to distortions, many of which associated with non-market policies and practices in major trading nations, that the WTO does not seem able to address adequately”
• Aggressive unilateral actions by the US targeting allies and foes alike with punitive tariffs
• The US’s decision to block appointments of members to the World Trade Organization’s Appellate Body that serves as the final arbiter in trade disputes.

The EU also complained about the US’s practice of blocking appointments to the appellate body that would help render a judgment in a WTO trade dispute.

“As more appellate body members leave office while the new appointments are being blocked, the dispute settlement system will soon fall into paralysis, rendering enforcement of the rules impossible,” the commission says in its memo circulated ahead of this week’s summit of EU leaders to discuss trade, among other topics. “That would equate to a 20-year step backward in global economic governance.”

The Commission will have an opportunity to act on its complaints later this week when the leaders of the world’s largest trading bloc meet to hash out a “comprehensive approach” to “improving with like-minded partners, the functioning of the WTO in crucial areas.” While it’s unclear whether the US would be amenable to any proposal brought by the Europeans, Moody’s gave the White House one more reason to consider it this morning, when it announced that the Trump administration imposing 25% auto tariffs would be credit negative for global automotive companies. Instead of harming foreign competitors first, tariffs would put the greatest strain on American firms like Ford and GM. Meanwhile European automakers without US plants – a group that includes Jaguar Land Rover and Volvo, “would be hit particularly hard.” On the other hand, Trump has refused to head the pleas of corporate America so far. What exactly would be needed to prompt him to change that position?

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In a week in which economic data takes a back seat, the big focus for markets this week is likely to be a potentially pivotal EU summit in Brussels.  With regards to the highly anticipated EU Summit on Thursday and Friday in Brussels, expect the big topics of discussion amongst EU leaders to be the latest trade war developments and Brexit, as well as migration policy, the EU budget,  security and reforming the economic and monetary union. It’s worth highlighting that ahead of the summit, EU leaders including Merkel and Macron also gather informally on Sunday to discuss immigration, amongst other subjects.

As for data next week, the US PCE report for May will be out on Friday and current market expectations is for a +0.2% mom core reading, which should push the annual reading up to +1.9% yoy from +1.8% in April. This would be the highest reading since February 2017. The consensus for the deflator is also +0.2% mom. In Europe the broad Euro area June CPI report is out on Friday too and the core print is expected to fall a modest one-tenth to +1.0% yoy. We should have a  decent idea of where that print should come following the regional reports however with June prints due in Spain, Italy and Germany on Thursday, and France on Friday morning.

Away from the inflation reports there isn’t a huge amount else to get excited about data-wise. In the US there are various regional manufacturing reports scattered throughout the week (Dallas Fed on Monday, Richmond Fed on Tuesday, Kansas Fed on Thursday, Chicago PMI on Friday) which are worth watching for their relative prices paid components if anything else. The June consumer confidence print is also due on Tuesday, preliminary durable and capital goods orders on Wednesday and the third and final Q1 GDP revisions on Thursday.

In Europe we’ve got the June confidence indicators for the Euro area on Thursday, and May money and credit aggregates data in the UK on Friday. Asia is fairly quiet next week.

Central bank wise we don’t have any policy meetings scheduled but there are a few speakers worth flagging. Over at the Fed, Atlanta Fed President Bostic (voter/ neutral) is due to hold an armchair conversation on Tuesday in Alabama in the evening, before Dallas Fed President Kaplan (neutral/voter) speaks in Houston shortly after. Boston Fed President Rosengren (non-voter/hawk) then speaks on Wednesday evening in Washington, before St Louis Fed President Bullard (nonvoter/dove) speaks on Thursday afternoon in St Louis, followed by Bostic again when he meets the Fed Up Coalition in Atlanta. Meanwhile, at the ECB we’ll hear from Hansson on Tuesday and Praet on Wednesday. BoE Governor Carney will also speak on Wednesday morning after the publication of the BoE’s latest Financial Stability Report. BoE Chief Economist Andy Haldane will also speak in London on Thursday afternoon which could be interesting following his dissent at this week’s BoE meeting.

Other things to watch out for this week according to Deutsche Bank’s Craig Nicol include Merkel’s Tuesday private talks with leaders of her coalition government on euro area reform and refugee policy. Part two of the Fed’s annual bank stress tests are also out on Thursday.

A detailed daily breakdown of key events courtesy of Deutsche Bank:

• Monday: It’s a fairly quiet start to the week on Monday with the only data of note in Europe being the June IFO survey in Germany, while in the US we’ll have the May Chicago Fed national activity index, May new home sales, and June Dallas Fed manufacturing activity index.
• Tuesday: Overnight in Japan we’ll get the May PPI print, before the focus turns to the UK with the June CBI retail sales report. In the US the most significant data due out is the June consumer confidence reading, while the June Richmond Fed manufacturing index and April S&P CoreLogic house prices index data are also due. Away from that the ECB’s Hansson is due to speak in the morning while in the evening we’re due to hear from the Fed’s Bostic and Kaplan. German Chancellor Merkel is also due to hold private talks with her coalition partners on refugee policy and euro area reform.
• Wednesday: In Asia on Wednesday we’re due to get Q1 money flow data from the BoJ and May industrial profits data in China. In Europe it is fairly quiet with June consumer confidence data in France and May E3 money supply data for the Euro area due. In the US the main focus will likely be on the preliminary May durable and capital goods orders data, while the May advance goods trade balance is also due along with May pending home sales. Central bank speak continues with the BoE’s Carney speaking in the morning about the BoE’s Financial Stability Report, followed later by the ECB’s Praet and Fed’s Rosengren.
• Thursday: The big focus on Thursday will likely be the EU Summit in Brussels where leaders are due to discuss migration policy, the EU budget, Brexit, security and reforming the economic and monetary union. Datawise, it is looking like a busy day for inflation releases in Europe with preliminary June CPI reports due in Spain, Italy and Germany. We’ll also get June confidence indicators for the Euro area while in the US the third and final reading for Q1 GDP and Core PCE is due, as well as the June Kansas City Fed manufacturing activity index and latest weekly initial jobless claims data. The Fed’s Bullard and Bostic are also both due to speak in the late afternoon. The Fed will also release part two of its annual bank stress test results.
• Friday: Friday looks set to be another busy day for inflation releases with preliminary June CPI reports due in France and the Euro area, followed by the May PCE report for the US. Other data worth watching includes May employment data in Japan, June unemployment data in Germany, May money and credit aggregates data and the final Q1 GDP print in the UK, and May personal income and spending, June Chicago Fed PMI and final June University of Michigan consumer sentiment revisions in the US.

Finally, Goldman looks at key economic releases along with consensus estimates and notes the durable goods report on Wednesday, the Q1 GDP revision on Thursday, and the personal income and spending report on Friday. In addition, there are several scheduled speaking engagements by Fed officials this week.

Monday, June 25

• 10:00 AM New home sales, May (GS flat, consensus +0.8%, last -1.5%): We expect new home sales remained flat in May, following a 1.5% decline in April. While favorable weather may have boosted sales, single family permits and mortgage loan applications both edged lower in May.
• 10:30 AM Dallas Fed manufacturing index, June (consensus +22.5, last +26.8)

Tuesday, June 26

• 09:00 AM S&P/Case-Shiller home price index, April (GS +0.5%, consensus +0.4%, last +0.53%): We expect the S&P/Case-Shiller 20-city home price index increased 0.5% in April, following a 0.5% increase in March. Our forecast mostly reflects the strong trend the index has been following (+0.7%, 3m ma) and the recent strength of other home price indices.
• 10:00 AM Richmond Fed manufacturing index, June (consensus +15, last +16)
• 10:00 AM Conference Board consumer confidence, June (GS 128.5, consensus 128.0, last 128.0): We expect that the consumer confidence index edged 0.5pt higher to 128.5 in the June report, as other higher frequency measures of sentiment and the stock market rose, but we see recent trade policy news as a downside risk.
• 1:15 PM Atlanta Fed President Raphael Bostic (FOMC voter) speaks: Federal Reserve Bank of Atlanta President Bostic will speak at an event hosted by the Birmingham Civil Rights Institute in Alabama. Audience and media Q&A are expected.
• 1:45 PM Dallas Fed President Robert Kaplan (FOMC non-voter) speaks: Federal Reserve Bank of Dallas President Kaplan will give the keynote speech at the Greater Houston Partnership’s State of Talent event in Houston, Texas. Audience and media Q&A are expected.

Wednesday, June 27

• 08:30 AM Durable goods orders, May preliminary (GS -1.0%, consensus -0.8%, last -1.6%); Durable goods orders ex-transportation, May preliminary (GS +0.7%, consensus +0.4%, last +0.9%); Core capital goods orders, May preliminary (GS +0.7%, consensus +0.5%, last +1.0%); Core capital goods shipments, May preliminary (GS +0.2%, consensus +0.3%, last +0.9%): We estimate durable goods orders pulled back 1.0% further in the preliminary May report, after decreasing 1.6% in April. We expect a firmer 0.7% increase in the durables ex-transportation category and +0.7% increase in core orders. We see scope for reacceleration in unfilled orders, and both top-line results and commentary from industrial firms remain solid. We forecast a more modest 0.2% rise in core capital goods shipments, reflecting somewhat softer industrial production data.
• 08:30 AM U.S. Census Bureau Report on Advance Economic Indicators; Advance goods trade balance, May (GS -$69.0bn, consensus -$69.0bn, last -$67.3bn); Wholesale inventories, May preliminary (last +0.1%): We estimate the goods trade deficit increased $1.7bn in May to -$69.0bn as goods imports likely rose further. We note that inbound container traffic also rebounded in the month, while outbound traffic fell.
• 10:00 AM Pending home sales, May (GS -2.5%, consensus +0.9%, last -1.3%): Regional housing data released so far deteriorated in May. We estimate pending home sales declined 2.5%. We have found pending home sales to be a useful leading indicator of existing home sales with a one- or two- month lag.
• 12:15 PM Boston Fed President Rosengren (FOMC non-voter) speaks: Boston Fed President Eric Rosengren will speak on the topic: “Ethics and Economics: Is the Economy Too Sensitive to Economic Downturns?” at the Peterson Institute for International Economics in Washington, D.C.

Thursday, June 28

• 08:30 AM GDP (third), Q1 (GS +2.2%, consensus +2.2%, last +2.2%); Personal consumption, Q1 (GS +1.0%, consensus +1.0%, last +1.0%); We expect the third vintage of Q1 GDP growth to remain unchanged at +2.2% (qoq ar), in line with consensus expectations. Personal consumption growth is likely to remain stable at +1.0%. Additionally, we see downside risk to inventories.
• 08:30 AM Initial jobless claims, week ended June 23 (GS 220k, consensus 220k, last 218k); Continuing jobless claims, week ended June 16 (consensus 1,718k, last 1,723k): We estimate initial jobless claims edged up by 2k to 220k in the week ending June 23, after filings unexpectedly edged down in the prior week. Consensus expects continuing claims—the number of persons receiving benefits through standard programs—to decline by 5k to 1,718k.
• 11:00 AM Kansas City Fed manufacturing survey, June (consensus +26, last +29)
• 10:45 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will present on the U.S. economy and monetary policy at the Ascension Health Management Annual Conference in St. Louis, Missouri. Audience and press Q&A are expected.
• 12:00 PM Atlanta Fed President Raphael Bostic (FOMC voter) speaks: Federal Reserve Bank of Atlanta President Bostic will hold a press briefing after a discussion on “barriers to and opportunities for quality affordable housing and jobs” with the Fed Up Coalition at the Center for Working Families in Atlanta, Georgia.

Friday, June 29

• 8:30 AM Personal income, May (GS +0.5%, consensus +0.4%, last +0.3%); Personal spending, May (GS +0.5%, consensus +0.4%, last +0.6%); PCE price index, May (GS +0.18%, consensus +0.2%, last +0.22); Core PCE price index, May (GS +0.17%, consensus +0.2%, last +0.16%); PCE price index (yoy), May (GS +2.21%, consensus +2.2%, last +1.97%); Core PCE price index (yoy), May (GS +1.90%, consensus +1.9%, last +1.80%): Based on details in the PPI, CPI and import price reports, we forecast that the core PCE price index rose +0.17% month-over-month in May, or 1.90% from a year ago. Additionally, we expect that the headline PCE price index increased 0.18% in May, or 2.21% from a year earlier. We expect a 0.5% increase in May personal income and a 0.5% gain in personal spending.
• 09:45 AM Chicago PMI, June (GS 59.2, consensus 60.0, last 62.7): Regional manufacturing surveys were mixed in June, and we estimate that the Chicago PMI weakened by 3.5pt to 59.2. Uncertainty about trade policy could potentially weigh on business sentiment in this report.
• 10:00 AM University of Michigan consumer sentiment, June final (GS 99.3, consensus 99.3, last 99.3): We expect the University of Michigan consumer sentiment index to remain flat at 99.3 in the final June estimate. The preliminary report’s measure of 5- to 10-year ahead inflation expectations rose to 2.6% in June.

Source: BofA, DB, Goldman

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