10 Things You Need To Know Before The Opening Bell, June 2, 2014

10 Things Before Opening Bell

June 02, 2014

Good morning! Here's what you need to know:

Things Are Looking Up In China: China's official Purchasing Managers' Index (PMI) climbed to 50.8 in May from 50.4 in April. This was better than the 50.7 expected by economists. The new orders sub-index increased to 52.3 from 51.2, the biggest increase in nine months. "The below-51 PMI is still weak, and there are still strong headwinds due to the downturn of the property sector and the anti-corruption campaign," said Bank of America Merrill Lynch's Ting Lu. "We expect Beijing to step up targeted measures, but we believe Beijing will resist calls for universal measures such as cutting benchmark rates and cutting RRR for all banks."

Korea's Exports Drop: South Korea's exports unexpectedly fell by 0.9% in May. Economists were looking for a 3.4% gain. Korean exports are often referred to as the global economic "canary in the coalmine" since it's the first major May economic report to be released, and it's very sensitive to activity in Asia.

Europe's Manufacturing Stats Disappoint: Economies across the eurozone released their May manufacturing PMIs, and the numbers weren't great. Italy's PMI fell to a 2-month low of 53.2, France's PMI fell to a 4-month low of 49.6, Austria's PMI fell to a 10-month low of 50.9, and Greece's PMI fell to a 2-month low of 51.0. Spain's PMI climbed to a 49-month high of 52.9, but it missed expectations for 53.0 print. "The May drop in the manufacturing PMI will inevitably add to the clamour for policymakers to provide a renewed, substantial boost to the region‟s economy and ward off the threat of deflation," said Markit's Chris Williamson.

Germany Is The Big Red Flag: Germany's PMI fell to a 7-month low of 52.3. "In Germany, the pace of expansion eased, possibly linked to some concerns over the situation in Ukraine, or perhaps simply due to the timing of Easter," noted Williamson. "Without any clear cause, the slowdown in the region‟s largest economy will perhaps be the biggest concern for the eurozone‟s growth trajectory if a rebound is not forthcoming in June." The country also saw month-over-month price declines.

What Would Apple Do: Apple's Worldwide Developers Conference (WWDC) kicks off. "At 10 a.m. local time, it will have a keynote to preview new software for the Mac and the iPhone," says BI's Jay Yarow. "It's also going to have some sort of new hardware, but don't expect something like the iWatch. "

Markets Are Up: Everythings in the green. In Europe, Britain's FTSE is up 0.3%, Germany's DAX is up 0.3%, Spain's IBEX is up 0.6%, and Italy's FTSE MIB is up 0.5%. Japan's Nikkei closed up 2.0% and Hong Kong's Hang Seng ended up 0.3%.

Spain Of Thrones: The King of Spain Juan Carlos unexpectedly abdicated the throne. His son Crown Prince Felipe will take over.

Carl Icahn, Phil Mickelson, And Some Other Guy: According to the WSJ and then later Reuters, the FBI and the SEC are investigating activist investor Carl Icahn, pro golfer Phil Mickelson, and gambler William Walters for possible insider trading involving private information provided by Icahn. Icahn vehemently denies any involvement, saying he's never met Mickelson and he's never heard of Walters. "I have done absolutely nothing wrong," Mickelson said, according to Reuters. "I have cooperated with the government in this investigation and will continue to do so. I wish I could fully discuss this matter, but under the current circumstances it's just not possible."

U.S. Manufacturing Update: We'll get the Markit (9:45 a.m. ET) and ISM (10:00 a.m. ET) monthly manufacturing reports shortly after the opening bell. Economists estimate the Markit PMI climbed to 56.2 in May from 55.4 in April. Economists estimate the ISM index climbed to 55.5 in May from 54.9 in April. "Regional manufacturing surveys all remained in expansion territory in May and manufacturing capacity utilization has also been trending upward," said Wells Fargo's John Silvia. "We expect ISM manufacturing to continue to improve in May and gradually edge higher in the coming months."

Construction Spending: Economists estimate construction spending (10:00 a.m. ET) climbed by 0.6% in April. "The residential category probably picked up modestly, mirroring the rise in housing starts," said Citi's Peter D'Antonio. "However, public projects probably continued to hold down the total."

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BONUS: The shift toward renting versus buying has resulted in demand for more multi-family buildings than single-family homes. UBS's Maury Harris recently discussed how this was impacting the economy: "To be sure, building a new single-family home adds more to the economy than the recent alternatives of building apartments or remodeling. For instance, each single- family home built adds approximately three jobs. That is around 2 1⁄2 times the jobs created for each apartment unit built in a multi-family apartment building ... Nevertheless, the absolute job formation associated with likely home and apartment building this year is not trivial. Using job creation multipliers provided by the National Association of Home Builders, last year, the 618,000 single-family starts created 1,806,000 jobs and 307,000 multifamily starts created 347,000 jobs for a total of 2,153,000 jobs. For 2014, our 625,000 estimate for single-family starts would require 856,000 jobs and the projected 425,000 in multifamily starts would generate 480,000 jobs for a total of 2,336,000 jobs. The 183,000 difference between 2013 and 2014 housing-related job formation is equivalent to adding around 15,000 jobs per month to nonfarm payroll growth."

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