Market 06/14: Consumer confidence shows cracks

UMich survey: Consumer confidence drops sharply

June Consumer Sentiment drops 65.6, (< estimate 72 & 69.1 previous)

• Current conditions index drops from 69.6 last month to 62.5

• Expectations drop to 67.6 vs 68.8 previous

• 1-year ahead inflation expectations unchanged at 3.3%

• 5-10 year ahead inflation expectations rise to 3.1%

In particular, confidence in real income growth (after inflation) over the next 1-2 years drops to the lowest since June 2012.

• This is the consequence as the labor market normalizes, unemployment rises (to 4%) while inflation remains high.

When it comes to home buying conditions, consumer sentiment at record low — result of mortgage rates still high.

Fed Mester: Inflation starting to decrease again

• We are starting to see inflation decrease again.

• Keeping rates at current level until inflation reaches 2% is not appropriate.

• But need significant inflation reduction over many months before cutting rates.

China: M1 money supply decreases, issues more ultra-long-term debt.

• China's M1 money supply (circulating cash) decreases -4.2% Y/Y in May (largest drop ever).

• Real M1 money supply adjusted for inflation decreases -4.5% Y/Y (largest drop since Jan 2000).

  • This is a big problem for China because circulating cash decreasing means people continue to limit spending and prefer investing-saving!

• Aggregate financing to the real economy (aggregate financing) increases +8.4% Y/Y, higher than April — due to government borrowing more debt.

  • The growth comes from increased government borrowing, with 1.2 trillion CNY bonds issued just this month.

  • Meanwhile, outstanding loans (loan stock) increase +8.9% Y/Y - slowest growth on record => businesses reduce capital demand.

• China also newly issued additional 35 billion CNY 50-year government bonds with yield 2.53% - record low yield.

• Government bonds are taking a large share in the national credit structure— as central and local governments ramp up fundraising.

Crypto Market: MicroStrategy increases bond offering to 700 million USD

• The publicly traded company owning the most Bitcoin in the world MicroStrategy increases bond offering to 700 million USD - to raise money to buy BTC.

• 300 million USD USDC just minted and transferred to an anonymous wallet

Europe Politics Update: French President Macron's political gamble

Summary of Macron's betting scandal:

• Heavy defeat against the far-right in the European Parliament election, President Macron returns home to temporarily dissolve the French National Assembly and call snap National Assembly elections on 6/30 (round 1) - and 07/07 (round 2).

This is considered Macron's risky gamble:

• Macron's initial intention was to weaken Le Pen's Far-Right Party (National Rally).

• For a candidate to advance to round 2 on 07/07, in round 1 on 06/30 that person must secure more than 50% of the votes.

• Macron is betting that National Rally candidates won't pass round 1 because they only hold 88/577 seats in the French National Assembly.

• Meanwhile, Macron previously won the election thanks to the alliance among 3 factions: Far-left - Left wing - Right wing against the Far-Right party.

• But surprisingly, the right-wing party Les Républicains announced they will side with National Rally.

  => High likelihood that Macron will fail in this gamble!

G7 leaders condemn this bet by Macron because:

• European people and the right wing are now quite dissatisfied with the immigration situation in France => increasing Macron's chance of failure.

• The temporary dissolution of the National Assembly is also condemned because it stalls administrative decisions — especially as Paris prepares for Olympics.

Q2 FY24 Earnings Report: Adobe

• Annual Recurring Revenue:

  • Creative segment: +13% Y/Y to 13.1 billion USD

  • Document Cloud segment: +26% Y/Y to 3.1 billion USD

• Revenue +10% Y/Y to 5.3 billion USD (20 million USD above expectations)

• Non-GAAP EPS: 4.48 USD (0.09 USD above expectations)

• Q3 FY24 Revenue guidance: 5.35 billion USD

Adobe stock surges after unexpectedly strong earnings

Some other news: BOJ keeps rates unchanged - signals QE reduction from July

1. JP Morgan says stock market data predicts Donald Trump will win the 2024 Presidential Election.

2. “Roaring Kitty” bought additional 4 million GameStop shares, raising total position to 262 million USD

   • Average purchase price: 23.41 USD/share

3. Bank of Japan - BOJ announces keeping short-term interest rate at 0-0.1%

   

   • BOJ maintains quantitative easing pace: buying 6000 billion JPY bonds monthly

   • Considering reducing government bond purchases and raising rates at the next meeting (07/30-31)