Quiet Close to the Week with Data and Whole Foods Deal in Focus

The Commerce Department’s report on US homebuilding this morning continued this week’s trend of soft economic data.  The number of housing starts in the month of May totaled an annualized rate of 1.092 million, a 5.5% decrease from the prior month’s revised reading, representing the lowest level in the past eight months.  The single family component declined 3.9% to a 794,000-unit pace, while the more volatile multi-family component tumbled 9.6%.  Similar weakness was displayed within the building permits data, which recorded a 4.9% decline in May to an annualized pace of 1.17 million.  Other data released today included a preliminary June reading of the University of Michigan’s consumer sentiment index, which displayed the lowest level since November at 94.5.  Both the expectations and current conditions components of the survey reported declines, as the post-election jump in consumer optimism surrounding the economy continues to soften.  US Treasury prices gained following the data reports, as yields/swap rates declined 1-3 bps across the curve.  The yield on the 10-year note is currently near 2.15%, 6 bps lower on the week.  Major US stock indices are mixed on the day, with food retailers leading losses following the announced $13.7 billion acquisition of Whole Foods by Amazon.  Overall, this week’s biggest declines were recorded in the technology sector, as the Nasdaq 100 fell 1.3%.  Crude oil prices traded marginally higher to finish the week, up 0.5% on the day but still 2.5% lower than Monday’s open.  WTI crude is currently trading near $44.75/barrel while Brent crude is just above $47.25/barrel, both close to their lowest levels since last November.

Abroad, this morning the Bank of Japan, as expected, announced its decision to leave the existing monetary policy unchanged, continuing the central bank’s target of 80 trillion Yen ($720 billion) in JGB purchases per year.  The BOJ did upgrade its outlook for private consumption for the first time this year, exhibiting increased confidence in the economy, albeit Governor Haruhiko Kuroda was quick to confirm that the current ultra-easy stimulus program would remain in place for the foreseeable future.  “We will debate an exit strategy only after 2 percent inflation is achieved and price growth stays there stably,” Kuroda explained.  Core inflation in the region was 0.3% in April, signaling that a tightening from the BOJ may not take place for a considerable amount of time.  In France this Sunday, President Emmanuel Macron will look to solidify his party’s majority in the final round of the parliamentary election.  Last week’s first round of voting resulted in Macron’s one year old Centrist party, La Republique En Marche, receiving a better-than-expected outcome. If the same momentum continues through to the final round of voting, Macron will be in an ideal position to get his planned reforms approved with minimal delay.  Today the dollar is down vs. both the Japanese yen (-0.1%) and euro (-0.4%), and looks to finish the week 0.3% lower against major currencies.