Global Shorts

 Data on Friday showed Canadian retail sales rose 0.7% in April as expected, bucking a downward trend over the past three months, with sales at the pump boosting the overall figure. Statistics Canada said retail sales, which includes cars, clothing, furniture, food and beverages and more, rose to C$66.8 billion ($48.78 billion) monthly. In terms of sales, overall sales grew 0.5% in April.Statscan, which polled just half of the respondents, initially estimated retail sales could fall 0.6% in May. In addition to petrol pump sales, which rose 4.5% for the first time this year, sales at food and drink retailers also rose 1.9%, the data showed. Petrol pumps and food and beverage retailers accounted for 10% and 19% of total retail sales respectively.Since the start of the year, Canada’s retail sector has been reeling from the highest interest rates in more than two decades, which has dented consumer spending. But economists had predicted sales would rebound in April due to higher gasoline and diesel prices, although consumer pressure remains. The Bank of Canada cut interest rates by 25 basis points to 4.75% for the first time in four years on June 5, and money markets raised expectations for another rate cut in July to about 73% from 71% before the release of retail sales data.Economists say Canadian consumer prices continue to slow, and consumer price index (CPI) data due next week will provide clarity on whether the expected drop in retail sales in May is due to lower sales or lower prices. Core retail sales, which exclude sales at gasoline pumps and motor vehicle and parts dealers, rose 1.4% in April. Sales grew in seven of nine subsectors. The biggest sales declines were at auto and parts dealers, where sales fell 2.2% in April. Statscan data shows this sub-sector is the largest contributor, accounting for more than a quarter of total retail sales.

 UK house prices rose for a second month in a row in April, rising by an annual average of 1.1% to 281,000 pounds ($358,000), the Office for National Statistics said on Wednesday, after rising 0.9% in March. The Office for National Statistics (ONS) private sector rents measure grew by 8.7% in the year to May, slightly slower than growth in the 12 months to April when it rose by 8.9%.The UK housing market has shown signs of recovery in recent months from a slowdown spurred by a surge in mortgage rates in late 2022 and 2023. But falling consumer price inflation has boosted household incomes and raised prospects for interest rate cuts. Official data released earlier on Wednesday showed that UK consumer price inflation returned to the Bank of England’s 2% target for the first time in nearly three years.

 Prices of new homes in China fell at their fastest pace in more than 9-1/2 years in May, official data showed on Monday, as the property sector struggled to find a bottom despite government efforts to curb oversupply and support debt-laden developers. According to calculations based on data from the National Bureau of Statistics (NBS), prices fell by 0.7% month-on-month in May. This was the 11th consecutive month-on-month decline and the largest decline since October 2014. On an annual basis, new house prices fell 3.9% on the year, compared with a 3.1% decline in April.China’s debt-laden real estate industry, once a key engine of China’s economic growth, has been hit by multiple crises since mid-2021, including debt defaults by developers and stalled construction of pre-sale housing projects. Authorities have stepped up support for the crisis-hit real estate sector, including providing 300 billion yuan ($41.35 billion) in funding to clear massive housing inventories, reducing payments and easing mortgage rules. However, analysts believe that these measures will have little effect on digesting the large housing inventory, and the lifting of purchase restrictions in large cities may further suppress purchasing sentiment in small and medium-sized cities. Last month, new house prices fell in almost all of the 70 cities surveyed by the Office for National Statistics.Separately, official data on Monday also showed that real estate investment fell by 10.1% annually in the first five months of this year, following a 9.8% decline from January to April. Home sales fell faster from January to May. Nie Wen, an economist at Shanghai Huabao Trust, said China’s real estate market will diverge, with new home sales in big cities driven by those who have the ability to renovate and sell existing homes, while real estate in smaller cities is expected to diverge. continued decline due to overpopulation and outmigration. Policymakers are expected to support local governments and state-owned enterprises in purchasing unsold low-rent housing through subsidized loans, while lowering interest rates and fees to support property owners in improving their homes, Nie said.

 U.S. consumer prices unexpectedly remained unchanged in May as gasoline prices fell, but inflation may still be too high for the Fed to start cutting interest rates before September amid continued strength in the labor market.Consumer price index data released Wednesday by the U.S. Department of Labor’s Bureau of Labor Statistics remained unchanged, with consumer prices rising 0.3% in April. CPI has been trending downward since reliable data became available in February and March. Price pressures are likely to continue to ease as major retailers including Target (TGT.N) slash prices on items from food to diapers with new tabs to appeal to inflation-weary consumers .Although annual gains in consumer prices have slowed from a peak of 9.1% in June 2022, inflation remains above the Fed’s 2% target. The government reported last week that job growth accelerated in May and wages rose, but the unemployment rate rose to 4%. Fed officials are expected later Wednesday to keep the benchmark overnight rate at its current range of 5.25%-5.50%, where it has been since July.Since March 2022, the Federal Reserve has raised policy rates by 525 basis points. Financial markets expect the Fed to begin an easing cycle in September, although that belief is waning. Some economists favor a rate cut in December, but others are less sure borrowing costs will be lower this year.

  A long-term slump in euro zone manufacturing may have turned around last month, a survey showed, improving business sentiment by showing new orders fell at the slowest pace in two years. HCOB’s final Eurozone Manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global rose to 47.3 in May from 45.7 in April, below the 50 mark, showing economic activity growing for the 23rd consecutive month. That was slightly lower than the initial estimate of 47.4.The index measuring output, which will be included in Wednesday’s composite PMI and is seen as a good gauge of the economy’s health, jumped to a 14-month high of 49.3 from 47.3 in April, although it was below an initial forecast of 49.6. This improvement may be at least partly due to a rebound in the new orders index, a measure of demand, from 44.1 to a two-year high of 47.3. Falling production costs are once again allowing factories to lower the prices they charge, which could give the European Central Bank room to cut interest rates on Thursday, a move widely expected as inflation eases.

 U.S. banking profits soared 79.5% to $64.2 billion in the first quarter of 2024, largely as big banks didn’t absorb billions of dollars in extraordinary charges to cover the costs of bank failures last spring. The FDIC said the profit increase was largely due to banks not being aware of the review, which led to lower bank profits at the end of 2023.Specifically, the FDIC said banks’ noninterest expenses fell by $22.5 billion in the first quarter, which was the main reason for the profit increase. The decline in special assessment fees accounted for more than half of these declining fees. Overall, the FDIC said asset quality measures remained generally good but noted deterioration in credit card and commercial real estate (CRE) portfolios. In particular, the FDIC said the illiquid rate on non-owner-occupied CRE loans is currently at 1.59%, the highest level since the fourth quarter of 2013, driven primarily by the office portfolios of large banks.The FDIC also said its “list of problem banks” expanded from 52 companies to 63 in the first quarter, with the banks’ total assets rising to $82.1 billion. Currently, 1.4% of banks are considered “problem banks,” a number the FDIC says is within the normal range. Bank deposits rose 1.1%, or $190.7 billion, for the second consecutive quarter. Uninsured deposits are expected to grow 0.9%, the first increase since late 2021.

  Bank of Japan Governor Kazuo Ueda said on Monday that the Bank of Japan would advance its inflation targeting framework cautiously, noting that some of the challenges facing Japan after years of ultra-loose monetary policy are “extraordinarily difficult.” In his opening speech at a central bank meeting hosted by the Bank of Japan in Tokyo, Ueda said Japan had “made progress in moving away from zero interest rates and raising inflation expectations.” He said that in order to achieve 2% inflation in a sustainable and stable manner, the Bank of Japan “will act cautiously like other central banks that set inflation target frameworks.” Accurately estimating the neutral rate is particularly challenging in Japan, Ueda noted, given the long period of short-term rates near zero over the past three decades.At the same meeting, Bank of Japan Deputy Governor Shinichi Uchida said Japan’s fight against persistent deflation was coming to an end, but acknowledged that anchoring inflation expectations at the 2% target was “a huge challenge.” Uchida said labor market conditions have undergone structural and irreversible changes that will help address the root causes of deflation such as excess labor supply.In March, the Bank of Japan made a landmark move to end the remnants of eight years of negative interest rates and other aggressive stimulus measures as it believes sustained achievement of its 2% inflation target is within reach. Ueda said the central bank intends to raise interest rates to a level that is neutral for the economy as long as economic growth and inflation are in line with its forecasts. The market expects the Bank of Japan to begin a full reduction in bond purchases soon, with Japan’s 10-year government bond yield rising to a 12-year high last week.  They also expect rates to rise by at least 0.20% by the end of the year.

 The survey showed new home prices will fall by 5.0% in 2024, compared with a 0.9% drop expected in the last survey in February. Prices are likely to remain unchanged in 2025, compared with a 0.5% rise predicted in February. The poll, conducted between May 10 and 17, may only partially take into account the government support measures announced on Friday to stabilize the housing market.Beijing has pledged up to 1 trillion yuan ($138 billion) in funding and loosened mortgage rules and local governments will buy “some” apartments, in what many analysts say is the government’s strongest move yet to turn around the industry. However, questions remain about the latest measures, particularly whether they were overly enforced and how the government can help clear out the trillions in housing inventory.Since the real estate market fell into crisis in 2021, Chinese authorities have launched wave after wave of policy support measures to boost demand, but with little success. Property sales are likely to contract 10.0% in 2024, up from the 5.0% forecast in the previous survey, while investment is expected to fall 10.0% from the 6.1% forecast in the previous survey, the survey showed.

 Indonesia’s April trade surplus was slightly higher than expected at $3.56 billion, as imports were lower than expected, Statistics Indonesia data showed on Wednesday.Southeast Asia’s largest economy has reported a merchandise trade surplus every month for the past four years, but the surplus has been narrowing recently due to weak exports. For more than a year, the resource-rich country’s exports have been hurt by falling commodity prices and weak global trade. Exports in April increased by 1.72% year-on-year to US$19.62 billion, lower than economists’ expectations of 4.57%. Although weaker than expected, Indonesia’s exports expanded in April for the first time in 11 months.Affected by falling global coal prices, coal shipments fell 19.26% to $2.61 billion in April from the same period last year despite higher export volumes. Coal is Indonesia’s largest export product. Imports grew by 4.62% to US$16.06 billion, while economists predicted an annual growth rate of 8.69%.April trade data reinforced expectations from Permata Bank economist Josua Pardede that Indonesia will continue to see a decline in its trade surplus and a widening of its current account deficit this year, but only to a limited extent. Pardede said: “As inflation expectations remain low, considering that the external balance is controllable and the Indonesian rupiah exchange rate remains stable, we believe that Bank Indonesia may maintain the BI interest rate at 6.25% at the Bank Indonesia meeting in May.”Bank Indonesia will hold its monthly monetary policy review next week. The central bank unexpectedly raised interest rates in April to support the rupiah currency after it fell to a four-year low against the dollar. Governor Perry Warjiyo said last week that the central bank may not need to raise interest rates further as the currency stabilizes and capital inflows return.

 Australian Treasurer Chalmers said on Sunday that this week’s federal budget is expected to help ease the country’s stubbornly high inflation as many Australians continue to deal with cost-of-living pressures.Economists at the Reserve Bank of Australia forecast that consumer inflation would rise to 3.8% in June from 3.6% in the first quarter and remain at that level until the end of the year, highlighting local inflation challenges. Since May 2022, the central bank has responded to persistently high inflation by raising interest rates by 425 basis points to a 12-year high of 4.35%.Chalmers said the budget due to be published on Tuesday would be “primarily, but not exclusively, focused on inflation”. “The budget will be a responsible budget that will ease cost of living pressures and invest in the future of Australian manufacturing,” he added.Officials said on Tuesday the budget would focus on housing as rising rents, rising interest rates and soaring costs of living in recent years have exacerbated what was already the world’s most unaffordable rental market. Chalmers said the government would chart a responsible middle path in a budget that would put it on track for a second surplus despite more spending measures.