Summary:
- US housing starts reach a decade high while building permits see a decline
- Wall Street moves lower, US dollar keeps rising as investors park their cash in safer assets amid broad-based risk-off
- US500 keeps moving down, the nearest support level still quite distant
Paradoxically, further escalation of the China - US trade dispute helps the US dollar recover as investors park their cash in the US Treasuries. As a result, the yield on US10Y debt is falling 4bps on the day while the greenback is the second best currency on Tuesday being just behind the Japanese yen, a natural safe haven asset.
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The US housing data for May proved to be mixed offering not too much for investors. Source: Macrobond, XTB Research
While everybody focuses on the ongoing trade thread we were offered two macroeconomic readings from the US. While housing starts reached 1350k easily beating the consensus at 1310k and climbing a decade high, the number of building permits disappointed showing 1301k while the consensus had looked for 1350k. Overall, the data turned out to be mixed indicating just a tiny progress has been made in the supply-constrained housing market. Taking into account that US mortgage rates have increased quite noticeably since the beginning of the year one may suspect that it could act to the detriment of house sales and thereby the underlying trends of housing starts as well as building permits.
US companies have paid out huge amounts of cash so far this year. Source: Bloomberg
While US indices are bleeding today, as their counterparts as well, overall companies’ long-term earnings power could have improved looking at amounts of cash paid to investors. According to the data since the start of 2018 till 7 June companies listed in the SP500 raised dividends by a net $25.5 billion thus far this year. The total number is 61% higher than the comparable figure for all of last year’s first half. Partially, it could be explained by the tax reform encouraging companies to bring back cash being hoarded abroad. Meanwhile, the US500 is moving down, and technically there no support in sight until 2680 points.
The daily chart seems to suggest that bears might still have some space to run until they reach any notable hurdle. The first one may be faced by sellers at around 2680 points, and until then they could keep going. Source: xStation5
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