Market 06/24: Many businesses bankrupt in the first 5 months of the year

Number of business bankruptcies at high level, recession probability remains >50%

As of end of May: 275 large companies have declared bankruptcy, the 2nd highest level in the same period since 2010.

• Most bankruptcies occurred in non-essential consumer companies as Americans begin to cut spending.

• According to Fed model, probability of recession next year is ~52%, down from 71% peak in May/2023, but just turned back up.

  • In the past 40 years, every time this probability >30%, high chance US economy recesses within 2 years after.

Goolsbee (Fed Chicago): Need to consider the degree of policy tightening

• Hope Fed will be more confident that inflation is heading towards 2%

• If there are more months of declining inflation like recently + cooling labor market, weakening economy then Fed should consider cutting interest rates

Dallas Fed June manufacturing index improves slightly from previous month

Dallas Fed manufacturing index rises to -15.1 (expected: -15; previous month: -19.4)

• New orders rise to -1.3

• Production rises to +0.7, prices paid rise to +21.5

• Average hours worked fall to -5, employment rises slightly to -2.9

California Legislative Analyst's Office (LAO) report: Job gains in 2023 were all fake

According to LAO, contrary to previous reports of large job gains in California in 2023, actual data after revisions is much worse:

• Monthly preliminary reports showed strong job growth (+117.000 jobs) in Q4/2023.

• However, first adjustment data (early revision) shows a decline of -32,000 jobs

• Revised data shows: Calendar year 2023 basically had no significant job growth (+9,000 jobs).

Read more about LAO report: https://lao.ca.gov/LAOEconTax/Article/Detail/783

Japan: BOJ intervenes verbally as JPY continues to fall

Summary of BOJ officials' views at 06/13 meeting:

• BOJ needs to continue closely monitoring economic data for decision at late July policy meeting.

• If appropriate, BOJ may raise policy interest rate.

• Maintaining loose policy at present is appropriate due to weak consumption, some auto shipments disrupted.

FYI: BOJ Meeting Minutes 06/13.

According to Bloomberg, BOJ officials mostly still dovish rather than hawkish:

JPY still under pressure: USD/JPY approaches alarming 160 level

Vice Finance Minister Masato Kanda: government ready to intervene in forex market 24/7 if necessary

• Investors turn to bet on JPY recovery: as this currency's slide will prompt Japan to intervene in the market again.

China: Both budget revenue and FDI decline

Total budget revenue in the first 5 months of the year -4.1% Y/Y down to 11.36 trillion CNY - the sharpest decline since February 2023.

• FDI into China has declined for the 12th consecutive month

• In the first 5 months, FDI into China decreased -28.2% Y/Y (down to 412.51 billion CNY), worse than the -27.9% decline in the first 4 months.

Key events for the week 06/24 - 06/30

1. Conference Board Consumer Confidence - Tuesday

2. New Home Sales - Wednesday

3. Q1/2024 GDP revised - Thursday

4. May PCE Inflation - Friday

5. Fed Monetary Policy Report - Friday

6. This week features a total of 8 Fed officials speaking events

• This week's earnings release schedule:

Other news

1. Coriander price surges over 400%

2. CBO raises US FY24 budget deficit forecast from -1.5 trillion USD to - 1.9 trillion USD, ~6.7% GDP, the highest deficit since 2021

• Read more: US public debt obsession - footprints in the financial market…

3. S&P500 share buybacks in Q1/2024 reached 237 billion USD, up +10% Y/Y and the 3rd highest in history,

   • … mainly from the 20 largest companies in the market.

4. Midea Group stock - Chinese real estate firm surges 70% on expected transition from Hong Kong-listed company to private company.