UK Trade Data

April 2016

Imports were valued at £41.0 billion while exports were worth £25.0 billion for a deficit of £16.0.  The UK trade gap is widening just as the west is experiencing a wave of anti-trade and isolationists sentiment.   While the potential vote to leave the EU isn’t centered on trade per se, many experts believe it will be upsetting in varying degrees.  Of course, those who are campaigning for “leave” think that liberation from the controls and limitations from unelected bureaucrats in Brussels would be a boon to England’s economy.

Export Economy

Trading Partners

The “Leave” campaign says that future trade is about America and other non-EU nations, which already enjoy greater trade in addition to larger deficits.

The UK has trade surplus with America that might actually improve if the pound gets hit upon a ‘yes’ vote to exit the European Union.  On that note, I’m not sure how much weaker they want the pound sterling to be in the UK- it’s been diving for some time now.

Moreover, I’m not sure how much retribution there could be from European trading partners that enjoy individual trading surpluses.

Commodities

The UK imports £6.3 billion in precious metals, adding greatly to the commodities deficit, which exits in most major categories across the board.

Figures in British Pound

UK Tourism

Open borders with your neighbors make it a lot easier to stroll in and out; while there is legitimate concern about evil-doers hiding in the crowds, the UK brings in £127 billion in tourism each year.

Opponents of the UK remaining in the EU point out that the benefits overwhelmingly favor the Establishment; be that as it may, 70% of the 26,875 businesses serving the tourism trade employ fewer than 10 people.

Tourists Sources:

U.S.: £2.55 billion

Germany: £1.41 billion

France: £1.35 billion

Australia: £1.10 billion

Spain: £905 million

Italy: £830 million

Irish Republic: £818 million

Conclusion

While I won’t go as far as former London mayor Boris Johnson with his totally dismissive anxiety surrounding a possible Brexit, this is beginning to remind me of the Y2K hype.  That said, the Bank of England has set up several emergency measures as Governor Mark Carney warns that a ‘leave’ vote would have harsh and immediate negative consequences. There are plans that potentially call for higher taxes and spending cuts in the wake of going it alone.

This isn’t much ado about nothing, but I think it’s overblown from an economy point of view.  From the market’s point of view, it could be a crazy ride, not unlike yesterday’s session – but it’s every day for a few weeks.

I’m looking to buy crazy gyrations.

Market

Yesterday’s economic data reminds us just how tough day-to-day life is in the real world.  The Philly Fed report, just like the Empire State saw continued pressure on employee growth and average hours worked. While the headline reading on inflation seemed inconsequential, the details provided a different story.

In the past year:

• Rents +3.8%
• Medical Care +3.5%
• Motor Vehicle Insurance +6.6%
• Tobacco +3.6%

It’s been a tough slog, and it’s not getting better anytime soon.

Last week, the market collapsed after several attempts to break out and selling became a proverbial snowball that morphed into a boulder.  Yesterday, just as that boulder was flying off a cliff, buyers emerged and nibbling became a feeding free-for-all.  As a result, the key support held, and we get a sense that there is a fair amount of money ready to pounce when it seems the worst is over.

Through it all the market remains trapped in a narrow range looking for direction rather than hunches.

On that note, it’s important that yesterday’s rally holds up and more buyers are lured off the sidelines.

Two stocks that could lead the way are the casino company MGM Resorts International (MGM) and gun-maker Smith & Wesson (SWHC).

SWHC saw its revenue climb 22% to $221 million and earnings up 6% to $0.66, both significantly above Wall Street consensus. The company’s Management is also lifting its financial guidance for the full year above consensus.

MGM also raised its guidance, sending its shares higher.

The S&P 500 bounced off its 50-day moving average; now, bulls need to see it get through 2,100.

Today’s Session

Housing starts and permits came in around consensus so not much movement there.  Equity futures were higher, but there wasn’t any conviction, and now we’ll open slightly lower.

Apple was hit with more bad news out of China, which continues to shake the company down and play Tim Cook for a chump.