Tuesday, July 19, 2016

Bonddad's Tuesday Linkfest

German Investor Confidence Tanks (BB)

German investor confidence deteriorated in July on concern that Britain’s decision to leave the European Union could weaken the region’s fragile economic recovery.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, fell to minus 6.8 from 19.2 in June. That’s the lowest level since November 2012. Economists in a Bloomberg survey predicted a drop to 9.

One Year Chart of Oil Prices

UK CFOs See Big Slowdown in Business Plans (BB)

In the survey, 73 percent of CFOs said they are less optimistic about the financial prospects for their companies, up from 32 percent three months earlier. It was the most pessimistic view since the study began in 2007 -- even topping levels after the collapse of Lehman Brothers a year later.

Eighty-two percent of CFOs said they expected their employers to reduce capital spending over the next year, while 83 percent predicted a slowdown in hiring. Those figures were up from 34 percent and 29 percent, respectively, three months earlier.

Ninety-five percent of the executives surveyed said the level of uncertainty facing their business is above normal, high or very high, up from 83 percent in the previous survey. The last time uncertainty was at similar levels was during the height of the Greek debt crisis in 2012. Also, 68 percent said they thought leaving the EU would cause a long-term deterioration in the U.K. business environment.

“While in recent stress tests, the major U.K. banks were assessed with declines of around 30 percent in commercial real estate prices, we fear that London residential could experience an even more severe downturn,” Societe Generale analysts including Marc Mozzi wrote in a note to clients on Monday. “Brexit will damage the U.K. economy, and some companies will almost certainly have to relocate parts of their business to retain access to the EU single market.”

London Home Sales Drop (BB)

Sales of London homes under construction slumped 34 percent in the second quarter as the prospect of a vote to leave the European Union damped demand already hurt by higher taxes.

The number of residences sold before completion fell to about 4,600 from 6,974 a year earlier, according to data compiled by researcher Molior London seen by Bloomberg News. A spokesman for Molior declined to comment.

“The approaching referendum added more layers of uncertainty,” said Tom Bill, head of London residential research at broker Knight Frank LLP. “That’s adding to the two-year slowdown from the December 2014 tax increase, which is still the biggest damping factor.”

5-Year Chart of UK's Construction PMI

Brexit Not Having a Material Impact on US Firms (Macroblog)

We asked firms to indicate how the outcome of the Brexit vote affected their sales growth outlook. Respondents could select a range of sentiments from "much more certain" to "much more uncertain."

Responses came from 244 firms representing a broad range of sectors and firm sizes, with roughly one-third indicating their sales growth outlook was "somewhat" or "much" more uncertain as a result of the vote (see the chart). Those noting heightened uncertainty were not concentrated in any one sector or firm-size category but represented a rather diverse group.

The Consumer Prices Index (CPI) rose by 0.5% in the year to June 2016, compared with a 0.3% rise in the year to May.

The June rate is a little above the position seen for most of 2016, though it is still relatively low historically.

Rises in air fares, prices for motor fuels and a variety of recreational and cultural goods and services were the main contributors to the increase in the rate.

These upward pressures were partially offset by falls in the price of furniture and furnishings and accommodation services.

Chart of CPI From the Report