Slowdown in U.S. Business-Equipment Orders May Weigh on Growth
An unexpected decline in U.S. orders for business equipment in May indicates cooling capital-goods investment may weigh on second-quarter economic growth, Commerce Department data showed Monday.
HIGHLIGHTS OF DURABLE GOODS (MAY)
- Orders for non-military capital goods excluding aircraft fell 0.2% (est. 0.4% gain) after 0.2% increase in prior month
- Shipments of those goods, which are used to calculate gross domestic product, fell 0.2% after 0.1% gain
- Bookings for all durable goods fell 1.1% (est. 0.6% drop) following 0.9% decline; excluding transportation-equipment demand, which is volatile, orders rose 0.1% (est. 0.4% gain)
The broad slowdown in equipment orders and shipments raises the risk that business investment will provide less of a boost than anticipated to the economic rebound this quarter, leaving the heavy lifting to household spending. The outlook for capital-goods production is clouded by cooling automobile sales, while overseas markets — though improving — are yet to show the kind of demand acceleration that would spur exports of U.S.-made goods.
Euro zone bond yields drop as EU approves Italian banking rescue
Euro zone government bond yields fell after Italy received the go-ahead for a state rescue of the assets of two failed lenders, helping to shore up its ailing banking system which is seen as dragging on growth in Italy and the bloc as a whole. The European Commission ended months of speculation over whether Italy would be able to bypass regulations preventing state bailouts of banks by granting approval for the deal. On Sunday, Italy began winding up two failed regional banks in a deal that could cost the state up to 17 billion euros ($19 billion). The rescue will see the lenders’ good assets go to Italy’s biggest retail bank, Intesa Sanpaolo. The Italian banking system is choked by a high level of bad loans and the prospect of some relief was enough for investors to buy up Italian bonds despite the additional borrowing such a rescue entails. “Negative consequences for the Italian state will be offset by the positive consequences for Italian government bonds in terms of reducing the already high uncertainty surrounding this issue,” said BBVA strategist Jaime Costero Denche.
China’s Large Caps Surge to 2015 High Amid MSCI, Handover Boost
China’s large-cap shares extended their outperformance amid investor optimism about MSCI Inc. inclusion and speculation state-backed funds were keeping markets buoyant before President Xi Jinping’s trip to Hong Kong this week. The SSE 50 Index of some of the nation’s biggest companies climbed 0.6 percent to 2,543.32, closing at the highest since August 2015. Gains were led by Guotai Junan Securities Co. and China Fortune Land Development Co., which are among the 222 mainland-traded shares that will enter MSCI’s global benchmark indexes. In Hong Kong, the Hang Seng Index rose 0.8 percent, snapping a four-day losing streak. The SSE 50 Index is outperforming the broader Shanghai Composite Index by the most in two years as a regulatory campaign to curb leverage drives up funding costs for smaller, privately run firms. China has a history of influencing domestic markets during important political events, and was said to have made preparations to support the Hong Kong stock market if needed to create a positive atmosphere before July 1, when Xi will visit the city to mark 20 years of Chinese rule.