"In the United States, doing good has come to be, like patriotism, a favorite device of persons with something to sell.”
Market Week Wrap-Up
- A freshening appetite for risk built up through most of the week as investors bet Friday's June US payrolls report would confirm the soft patch was fading away, encouraged by the surprisingly strong ADP jobs data. By the end of trading on Thursday global equity markets were up sharply, the key Dow Jones Transport Average moved out to all-time highs and copper prices were surging. The PBoC and ECB responded to rising inflation levels this week: China's central bank surprised markets with a pair of unexpected increases to its key deposit and lending rates and the ECB raised its main rate for the second time this year. Developments on both sides of the Atlantic late in the week soured the trading environment. Contagion began spreading in the peripheral euro zone debt crisis. Moody's downgraded Portugal's sovereign ratings by four notches on Wednesday, pushing several ECB governors to condemn the ratings agencies and reiterate calls for the creation of a dedicated euro zone ratings organization to supplant them. Contagion worsened on Friday as doubts emerged about the health of the Italian banking system, significantly widening the spread on Italian government debt. Then on Friday morning the June US payrolls report hit markets with a thud, delivering an anemic +18K gain versus expectations for +105K nonfarm jobs. When the birth-death adjustment was taken into account, the June payrolls were in negative territory. US indices fell only modestly on the news as many market participants noted the jobs data is a lagging indicator that could still show improvement in coming months. For the week the S&P rose 0.3%, the Dow gained 0.6% while the NASDAQ added 1.6%.
- The first look at the US Q2 GDP and the revision of Q1 GDP figure from the previously reported +1.9% increase to a nearly flat +0.4% upset markets this morning. Taken together, the data indicated that the "soft patch" in the US economy during the first half of the year was even softer than previously believed. Meanwhile in Washington political maneuvering continued after House Speaker Boehner failed to get his caucus behind attempts to pass his bill in the House, prompting Senate Majority Leader Reid to press on with his own last ditch package. Equities declined in the premarket and fell a bit further after the open, only to recover after the July Chicago Purchasing Manager Index and final reading of the July University of Michigan data came out. Neither report was very strong, and the latter was the lowest in more than two years. Spot gold spiked back above $1,630 after the GDP data but is off its session higher. Note that the VIX index pushed out to the highest levels seen since March earlier this morning. US Treasury markets are holding near session highs despite strong rebound for US stock indices. The 10-year yield has fallen back below 2.9%.
- Chevron's profits were very strong in its Q2, growing nearly 50% on a y/y basis, beating expectations. Production was lower on a y/y basis, but higher selling prices more than made up the difference. Note that the firm's revenue disappointed. Shale gas major Chesapeake Energy's quarterly revenue crushed expectations, while profits (ex items) were also above consensus. Analysts were eager to hear about the firm's progress in the Utica shale formation, although no production data was provided.
- The natural disasters of the Spring did not keep insurance giant MetLife from crushing expectations. Earlier the company had already warned of an unexpectedly large catastrophe loss in the quarter, but nevertheless the firm's business grew sharply across units. Coventry Health had solid profits and revenues, and raised its FY11 outlook. Healthcare supplies giant McKesson showed strong growth across its business, boosting both the top- and bottom-lines, allowing it to raise its full-year outlook.
- On the consumer front, Starbucks modestly exceeded analysts' estimates and raised its FY11 guidance slightly. The firm's comp sales held up nicely, as price increases seemed not to substantially cut the firm's business. New handset spinoff Motorola Mobility did quite well in its Q2, however its outlook for Q3 was very weak, as the company warned that key product delays would seriously impede profitability. Newell Rubbermaid cut its FY11 outlook slightly, even as profits and revenue topped expectations.
- Three major mining names missed consensus expectations in earnings. Despite reporting 74% y/y increase in net income, rising costs and the big gains in the Brazilian Real killed Vale's profits, and the company warned that these trends would continue to be an impediment moving forward. Newmont Mining blamed its miss on higher costs and lower production, especially copper, production of which fell 45% y/y. Arch Coal blamed its miss on the bad weather impact this spring, plus higher costs.
- The weaker US data paired with no progress on the debt impasse sent risk aversion sentiment sharply higher during the US session, sending the Swiss Franc and spot gold out to fresh all-time highs. The yen strengthened to fresh post-G7 intervention highs around 77.00. Dealers are keenly aware that spreads on peripheral European debt continued to widen, which does not bode well for Europe, even as overall markets remain preoccupied with the US debt ceiling soap opera. Yen strength continued to provoke verbal intervention; Japan PM Kan reiterated that the government would carefully monitor FX price movements but he would not comment directly on either outright currency levels or possible intervention.
Week of 8/1/2011 thru 8/4/2011
Monday, August 01, 2011
Economic
10:00 US July ISM Manufacturing, June Construction Spending
11:30 US Treasury's 3- and 6-month bill auction
Tuesday, August 02, 2011
Economic
08:30 US June Personal Income, June Personal Spending, June PCE Core
11:30 US Treasury's 3- and 6-month bill auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, August 03, 2011
Economic
07:30 US July Challenger Job Cuts
08:15 US July ADP Employment Change
09:00 US Treasury Quarterly Refunding Announcement
10:00 US July ISM Non-Manufacturing, June Factory Orders
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
Thursday, August 04, 2011
Economic
08:30 Initial Jobless Claims, Continuing Claims
10:30 DoE Natural Gas Inventories
Friday, August 05, 2011
Economic
07:00 Canada July Unemployment
08:30 US July Unemployment Rate, June Nonfarm Payrolls, June Manufacturing Payrolls, June Average Hourly Earnings
15:00 US June Consumer Credit
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US June Durable Goods Orders
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's 5-year note auction
14:00 Fed Beige Book
Todays Headlines
8:21:16 AM
(DE) S&P comments on Danish banks: More banks could default; as many as 15 may default
- Banks will fail due to loans made to the commercial property, agricultural sectors during the boom in 2005-2007.
***Reminder: On 1st July Moody's commented on the Danish Banking Sector stating that funding has become harder for sector due to Gov't unwillingness to bear losses for bank failures
9:24:49 AM
(US) Chinese rating agency Dagong Global Credit Rating Chairman Guan Jianzhong: Might cut the US sovereign rating from A+ as soon as Aug 1st - financial press
- Dagong states that it will definitely cut the rating, regardless whether there will be a compromise.
- Guan defended Dagong's higher AA+ sovereign rating for China, saying it's natural for Washington's biggest creditor to have a higher rating.
1:01:49 PM
*(US) TREASURY'S $29B 7-YEAR NOTE AUCTION DRAWS 2.28%; BID-TO-COVER RATIO: 2.63 V 2.62 PRIOR AND 2.86 AVG OVER THE LAST 10
- Indirect bidders take 39.55% of competitive bids, with 72% allotted at the high
- Direct bidders take 9.26%, primary dealers 51.2%
- Median 2.222%, low 2.097%
1:06:19 PM
(US) S&P notes today's webinar was scheduled weeks ago and will not make any new announcements, will not discuss any of the current debt proposals in Congress - webcast
- Webinar will discuss rationale of prior credit watch negative action.
- S&P's Chambers: Comments that the debate around the debt ceiling has been "detrimental," creating needless uncertainty.
1:40:56 PM
(US) Speaker Boehner (R-OH): Calls for Senate to pass the bills provided to the Senate, bills are reasonable and there is no reason for Senate to say no
- Cantor (R-VA): Senator Reid has three options, suffer econonmic consequences of default, accept this new Boehner bill, or accept prior bill with Cut Cap and Balance
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US June Durable Goods Orders
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's 5-year note auction
14:00 Fed Beige Book
Todays Headlines
8:03:50 AM
Fiat S.p.A Chrysler Reports Q2 Net loss $370M v loss $172M y/y, Operating profit $181M, R$13.7B v $10.5B y/y
- Reaffirms guidance for FY11 Net income $200-500M, Rev exceeding $55B
- Reaffirms guidance for FY11 free cash flow of more than $1B.
9:00:04 AM
*(US) MAY S&P/CASESHILLER 20 CITY M/M: -0.05% V 0.00%E; YOY:-4.51% V -4.50%E; HOME PRICE INDEX: 139.87V 139.80E
- Prior Composite-20 M/M revised from -0.09% to +0.44%
- Prior Y/Y revised from -3.96% to -4.22%
- Prior Home Price Index: revised from 138.84 to 138.46
9:59:23 AM
*(US) JULY RICHMOND FED MANUFACTURING INDEX: -1 V +5E
- Wages 10 v 9 prior
- Number of employees: 4 v 12 prior
- Volume of new orders: -5 v +1 prior
- Order backlog -18 v -11 prior
10:11:28 AM
(US) Senate Majority leader Reid reiterates that the short term plan from the House Republicans would lead to a credit downgrade and will not pass the Senate
- House Speaker Boehner comments that he expects his plan to pass the House and Senate
- Senate minority leader McConnell: Notes that Boehner's deficit plan 'pulls the wool over the US people's eyes'
11:02:26 AM
NY Fed: Purchased $3.12B in outright coupon purchase; dealers submitted $10.58B for consideration (bid to cover 3.39)
- Heaviest purchase was $578M in the 08/15/19 maturity
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
09:00 US May S&P/CS Home Price Index, May S&P/CS Composite-20
10:00 US July Consumer Confidence, July Richmond Fed Manufacturing, June New Home Sales
11:30 US Treasury's 4-week bill auction
13:00 US Treasury's 2-year note auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
7:00:09 AM
(IT) Italy Fin Min Tremonti: Markets have a misleading view regarding euro zone debt - addressing senate
- Tensions in the market reflects issues with credibility in poltics
- Reiterates support for joint European bonds
- Budget plans are in line with EU requirements
6:09:18 AM
*(BE) BELGIUM DEBT AGENCY SELLS APPROX €2.5B VS. €1.5-2.5B INDICATED RANGE IN 2017, 2021 AND 2041 BONDS
- Sells €403M in 3.50% Jun 2017 OLO; avg yield 3.819% v 3.753% prior; Bid-to-cover: 2.78x v 1.72x prior
- Sells €1.06B in 4.25% Sep 2021 OLO; avg yield 4.274% v 4.250%; bid-to-cover 1.94x v 1.67x prior
- Sells €1.04B in 4.25% Mar 2041 OLO; avg yield 4.826% v 4.815%prior; Bid-to-cover: 1.61x v 1.49x prior
7:28:38 AM
(BR) Brazil Central Bank Weekly Economists Survey
- Maintains 12-month inflation at 5.4%
- Maintains 2011 inflation view at 6.3%
- Raises 2012 inflation view to 5.3% from 5.2% prior
- Maintains 2011 GDP growth at 3.9%
10:27:46 AM
*(IS) ISRAEL CENTRAL BANK LEAVES BASE RATE UNCHANGED AT 3.25%; AS EXPECTED
- Inflations is still high but recent CPI data is in line with target range for inflation.
- Slower expansion of exports helped moderate Q2 economic activity.
- Expects measures taken by the central bank and govt to influence housing prices over the next year; the 13.7% avg housing price rise in the last year is a lot.
10:34:08 AM
(US) Moody's comments on US bank exposure to municipal bonds market, exposure is manageable
- No US bank's rating is solely at risk due to exposure to municipal bonds
- Agency conducted stress tests on the banks'municipal portfolios to gauge their performance under a more adverse economic scenario.
12:22:38 PM
(US) House Speaker Boehner's budget plan said to be based on two debt ceiling increases, in line with prior reports - financial press
- The plan would seek an initial debt ceiling increase of $1T and then a second increase of $1.6T. Would include about $1.2T in spending cuts and trigger automatic cuts if spending exceeds caps.
- Would also include a provision that requires Congress to vote on a balance budget amendment between October and the end of the year.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US June CPI, CPI Ex Food & Energy, CPI Core, July Empire Manufacturing, Canada May Manufacturing Shipments
09:15 US June Industrial Production, June Capacity Utilization
09:55 US July Prelim University of Michigan Confidence
10:30 Canada Q2 Senior Loan Officer Survey, Q2 Business Outlook
Todays Headlines
7:00:09 AM
(IT) Italy Fin Min Tremonti: Markets have a misleading view regarding euro zone debt - addressing senate
- Tensions in the market reflects issues with credibility in poltics
- Reiterates support for joint European bonds
- Budget plans are in line with EU requirements
7:19:37 AM
(IR) Ireland Finance Ministry: EU/ECB/IMF troika has endorsed Ireland's progress, passed quarterly review
- All bailout targets have been met, finances stabilizing
- Might take more than €3.6B budget adjustment to meet deficit target
- Says govt probably fully funded until the end of 2013; High market rates does not affect the country
- Still target a limited return to markets in 2012
8:30:03 AM
*(US) INITIAL JOBLESS CLAIMS: 405K V 415KE; CONTINUING CLAIMS: 3.727M V 3.68ME
- Prior Initial Claims revised higher from 418K to 427K
- Prior Continuing Claims revised higher from 3.681M to 3.721M
9:01:44 AM
(IR) IMF/EU/ECB Troika: Endorses Ireland's program; country continues to steadfastly implement its reforms; meeting all targets
- Next review mid-Oct
- Recapitalization of banking sector on track
- Forecasts 2011 budget deficit less than 10.5% of GDP (slightly better than 10.5% target)
9:09:39 AM
*(IT) ITALY SENATE REJECTS NO-CONFIDENCE MEASURE; Approves austerity budget package, as expected
**Insight: The austerity bill now goes to the Chamber of Deputies, where discussion and vote should take place on Friday, July 15th.
- Once approved by the lower house, the President has to sign the bill into law.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US June Advance Retail Sales, June PPI, PPI Ex Food & Energy, PPI Core, Initial Jobless Claims, Continuing Claims
10:00 US May Business Inventories
10:30 DoE Natural Gas Inventories
11:00 US Treasury's TIPS announcement
13:00 US Treasury's 30-year bond auction
Todays Headlines
8:30:06 AM
*(US) JUN IMPORT PRICE INDEX M/M: -0.5% V -0.6%E; Y/Y: 13.6% V 13.2%E
- Prior MoM revised lower from 0.2% to 0.1%
- Prior YoY revised higher from 12.5% to 12.8%
9:28:36 AM
MKM Partners Initiates Semiconductor sector with a cautious fundamental view; INTC initiated Buy, price target $25
- CODE initiated Buy, price target $27
- AMD initiated Sell, price target $5
- MU initiated Neutral, price target $8
9:42:14 AM
(IN) Three explosions heard in Mumbai, India - local press reports
- Reports say the explosions heard in central and southern part of Mumbai. As many as 15 people reported injured so far.
- Follow up: Reports indicate up to 100 wounded in the attacks and 15 killed. At least one of the bombs was a car bomb.
- All of Mumbai has been placed on high alert for further attacks. Other Indian cities also put on alert.
11:58:11 AM
(US) Fed's Bernanke: Reiterates that the Fed needs to keep all options on the table for easing policy, more quantitative easing (QE) is one option
- Reiterates that the US economy still requires a good deal of suppor.
- USD is decline for many reasons, decline in the USD had contributed somewhat to higher energy prices
1:01:45 PM
*(US) TREASURY'S $21B 10-YEAR NOTE REOPENING DRAWS 2.918%; BID-TO-COVER RATIO: 3.17 V 3.23 PRIOR AND 3.15 OVER THE LAST 7
- Indirect bidders take 41.9% of competitive bids, with 65.17% allotted at high
- 13.9% go to Direct bidders; 44.1% go to Dealers
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US June Import Price Index
08:30 US June Import Price Index
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's 10-year note auction
Todays Headlines
10:05:45 AM
(US) Senate Minority Leader McConnell (R-KY): Republicans will ensure the US will not default on its obligations; Democrats have offered a few billion in spending cuts with 'empty promises' of more spending cuts
- Comments that as long as Obama is in the White House, a solution to the US debt problem is most likely unattainable
11:22:28 AM
(GR) Greece Fin Min Venezelos: Greece rejects any bailout or rescue deal that involves partial default on its debt
- Greece is being used as an excuse for an attack on the euro currency; protecting Greece protects Europe
- Political decision are made much more slowly than financial markets move. The long-term sustainability of debt is the only thing that matters.
- Greece will need next loan tranche by Sept 15, country is prepared to apply the new program
1:01:44 PM
*(US) TREASURY'S $32B 3-YEAR NOTE AUCTION DRAWS 0.67%; BID-TO-COVER RATIO: 3.22 V 3.28 PRIOR AND 3.14 AVG OVER THE LAST 10 AUCTIONS
- Indirect bidders take 34.5% of competitive bids; direct bidders take 16.5% of competitive bids, dealers take 48.9%.
- 31.73% allotted at high
- median 0.64%, low 0.578%
2:08:47 PM
(US) Senate Minority Leader McConnell (R-KY): Would like to see a three-stage plan to gradually raise the debt limit - Politico
- Senate Republicans are actively discussing a new plan under which the debt ceiling would grow in three increments over the remainder of this Congress unless lawmakers approve a veto proof resolution of disapproval.
How the new approach will sit with House Republicans is unclear.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
07:30 USJune NFIB Small Business Optimism
08:30 US May Trade Balance, Canada May Trade Balance
10:00 US July IBD/TIPP Economic Optimism
11:30 US Treasury's 4-week bill auction
13:00 US Treasury's 3-year note auction
14:00 FOMC Minutes
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
11:02:32 AM
NY Fed: Purchased $2.91B in outright coupon purchase; dealers submitted $12.02B for consideration (bid to cover 4.13)
- Heaviest purchase was $1.49B in the 06/30/16 maturity
- Purchased maturities dated 07/31/2015 - 12/31/2016
12:19:58 PM
(EU) ECB's Bini Smaghi: Falling pressure from commodity prices is a temporary phenomenon; seeing trend of self-sustaining recovery taking hold in certain parts of Europe
- A sovereign default would dramatically weaken the euro zone.
- Euro zone inflation expectations remain stable, for now.
- Sovereign and bank risks are linked.
3:36:23 PM
(GR) Negotiations at Eurofin meeting over participation of European banks in Greek bailout are said to have broken down - financial press
- One unnamed official said that the voluntary rollover option "is basically dead"
- NOTE: Overnight FT reporting today's Brussels meeting may signal abandonment for French-supported plan for banks to rollover their debt.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
"Treasure the love you have received above all. It will survive long after your gold and good health have vanished.”
Market Week Wrap-Up
- A freshening appetite for risk built up through most of the week as investors bet Friday's June US payrolls report would confirm the soft patch was fading away, encouraged by the surprisingly strong ADP jobs data. By the end of trading on Thursday global equity markets were up sharply, the key Dow Jones Transport Average moved out to all-time highs and copper prices were surging. The PBoC and ECB responded to rising inflation levels this week: China's central bank surprised markets with a pair of unexpected increases to its key deposit and lending rates and the ECB raised its main rate for the second time this year. Developments on both sides of the Atlantic late in the week soured the trading environment. Contagion began spreading in the peripheral euro zone debt crisis. Moody's downgraded Portugal's sovereign ratings by four notches on Wednesday, pushing several ECB governors to condemn the ratings agencies and reiterate calls for the creation of a dedicated euro zone ratings organization to supplant them. Contagion worsened on Friday as doubts emerged about the health of the Italian banking system, significantly widening the spread on Italian government debt. Then on Friday morning the June US payrolls report hit markets with a thud, delivering an anemic +18K gain versus expectations for +105K nonfarm jobs. When the birth-death adjustment was taken into account, the June payrolls were in negative territory. US indices fell only modestly on the news as many market participants noted the jobs data is a lagging indicator that could still show improvement in coming months. For the week the S&P rose 0.3%, the Dow gained 0.6% while the NASDAQ added 1.6%.
- The trading week was light of major equity news, although it's worth noting that earnings season unofficially kicks off with Alcoa's quarterly report next Monday. Visa reaffirmed its FY11 guidance, reassuring investors that all is well after the Fed promulgated new interchange fee rules this month. The company's CEO said that Visa is ready to "compete vigorously" under the lowered swipe fee structure, forecasting that FY12 will bear the weight of the new regulations. On the M&A front, Immucor received private equity offer from TPG capital at $27/share, in a deal valued around $2B.
- US retailers reported very strong June same-store sales, with nearly all major firms meeting or beating expectations. However analysts offered some critical comments on the methods used to achieve the results, noting that the gains were helped by significant promotions that could impact Q2 earnings. Some retailers cut guidance despite solid same store sales numbers, including JC Penney, which blamed promotional activities. Most department store names were way ahead of the Street estimates, with high-end name Saks once again a real standout and Kohl's very strong. Apparel names Gap, Limited, and TJX crushed expectations and significantly boosted comps over May levels.
- US Treasury yields entered the week at some of the highest levels seen in more than a month. A swift rebound in stock markets convinced bond traders to take some profits. For much of the week yields were consolidating at those higher levels helped by June economic data that showed improvement from May's soft patch. By Friday though, prices surged once again after the June labor report missed all Wall Street expectations by a wide margin. Risk aversion was also fortified by renewed signs of contagion in the European periphery. Italian 10-year bond yields hit the highest levels seen in 9 years while the German bund slid towards 2.8%. The US benchmark 10-year closed out the week just above what appears to be an increasingly important 3% level.
- The cloud of euphoria generated by the passage of the Greek austerity program cleared up this week, revealing the myriad peripheral problems facing the euro zone. European finance ministers may have approved the next tranche of Greek aid over the weekend, but there was no agreement on the key problem of facilitating the participation of private investors. S&P offered its own spin, commenting that the debt rollover plans offered so far may put Greece in selective default, reinforcing the sense that the ratings agencies do not believe the French alternative for voluntary Greek bond rollovers into longer maturities would fly. Moody's slashed Portugal's sovereign credit rating four notches to junk territory and noted that there is a risk that the country will require a second round of official financing before it can return to the private markets. The ECB raised its key rate by 0.25% to 1.50%, and also suspended the minimum credit threshold for Portugal.
- By the end of the week, contagion flared up ahead of next Friday's release of the long-awaited European bank stress tests. Italian bank stocks fell sharply on rumors that several had failed and questions were raised about the ability of Italy to carry out its austerity plans. Italian Finance Minister Tremonti offered more details on the recently approved plans, which include total government spending cuts of up to €51B through 2014, higher than prior press reports that estimated it at €47B. More scandals hit the troubled Italian ruling coalition, and there were widespread rumors that Tremonti might resign imminently.
- The euro weakened steadily under pressure from peripheral issues. EUR/USD drifted off Sunday's Asian highs of 1.4569 and declined sharply lower after Moody's downgraded Portugal. Several times the pair tested a key 2011 uptrend line around the 1.4180/90 area but managed to hold that level. EUR/CHF gave back ground and dropped below the 1.20 handle after testing above 1.2330 earlier in the week. Dealers conceded that dollar bulls have a window of opportunity given risk aversion and rumors that policy makers in Washington might offer a tax holiday on repatriated earnings brought back from overseas by US companies.
- A long-awaited PBoC rate increase tightened the key one-year lending and deposit rates, moving both higher by 25bps to 6.57% and 3.50%, respectively. The rate hike was two weeks removed from Premier Wen's op/ed in the FT that suggested price levels had reached "controllable" ranges, comments that underpin expectations of a June CPI print rising to a multi-month high above six percent. Note that last month's inflation data will be released as early as Friday evening (US time) - ahead of the other economic metrics on tap for next week - as the China State Council takes more concerted measures to counter recent press leaks. Despite projects for higher inflation in June, several local analysts now anticipate the PBoC to pause its tightening campaign for the rest of the year as property sector curbs and an ebb in food price surges are expected to bring inflation back below 5% in the second half of the year.
- A mixed bag of economic data down under continued to confound expectations for monetary policy from the Reserve Bank of Australia. Building approvals and retail sales both missed expectations while falling on sequential basis, but the Aussie labor sector remained robust with 23K new jobs coming in above the 15K consensus. The RBA policy meeting early in the week saw the central bank maintain its dovish tone, reiterating a mildly restrictive policy stance remains appropriate while also noting that 2011 growth is unlikely to be as strong as expected. Quarterly inflation data set for a late July release is still seen as pivotal for future policy bias as AUD/USD remained contained below $1.08 for the second consecutive week.
Week of 7/11/2011 thru 7/15/2011
Monday, July 11, 2011
Economic
08:15 Canada June Housing Starts
11:30 US Treasury's 3- and 6-month bill auction
Tuesday, July 12, 2011
Economic
07:30 USJune NFIB Small Business Optimism
08:30 US May Trade Balance, Canada May Trade Balance
10:00 US July IBD/TIPP Economic Optimism
11:30 US Treasury's 4-week bill auction
13:00 US Treasury's 3-year note auction
14:00 FOMC Minutes
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, July 13, 2011
Economic
08:30 US June Import Price Index
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's 10-year note auction
14:00 US June Budget Statement
Thursday, July 14, 2011
Economic
08:30 US June Advance Retail Sales, June PPI, PPI Ex Food & Energy, PPI Core, Initial Jobless Claims, Continuing Claims
10:00 US May Business Inventories
10:30 DoE Natural Gas Inventories
11:00 US Treasury's TIPS announcement
13:00 US Treasury's 30-year bond auction
Friday, July 15, 2011
Economic
08:30 US June CPI, CPI Ex Food & Energy, CPI Core, July Empire Manufacturing, Canada May Manufacturing Shipments
09:15 US June Industrial Production, June Capacity Utilization
09:55 US July Prelim University of Michigan Confidence
10:30 Canada Q2 Senior Loan Officer Survey, Q2 Business Outlook
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US June Unemployment Rate, June Nonfarm Payrolls, June Manufacturing Payrolls, June Average Hourly Earnings
10:00 US May Wholesale Inventories
15:00 US May Consumer Credit
Todays Headlines
7:00:02 AM
*(US) MBA MORTGAGE APPLICATIONS W/E JUL 1ST: -5.2% V -2.7% PRIOR
- Refi's: -9.2% v -2.6% prior.
- Avg Rate on 30y mortgage: 4.69% v 4.46% prior.
- Purchase Index: (Seasonally adj): +4.8% v -3.0% prior.
8:34:33 AM
(EU) ECB Chief Trichet: To monitor all developments "very closely," to monitor upside inflation rates "very closely"; have seen deceleration of growth, uncertainty remains elevated - prepared remarks
- Further adjustment of interest rates is warranted; ample amounts of liquidity could fuel price pressures
- ECB policy remains accommodative. Interest rates remain low across the maturity spectrum.
8:50:30 AM
(EU) ECB Chief Trichet: ECB staff projections already incorporate rate increase; staff publishes ranges in order to capture uncertainty; reiterates ECB does not precommit on rates - Q&A
- Today's decision to raise rates was important, ECB always does what is necessary to maintain price stability.
- Rate hikes were made at the right time in order to maintain price stability.
8:52:58 AM
(PO) ECB's Trichet: ECB has decided to suspend minimum credit threshold for Portugal, until further notice - rate decision Q&A
- To issue a press release on Portugal collateral in the near future.
- "ECB says 'no' to a credit event, 'no' to a selective default." Notes that the ECB's position on private sector debt rollover has not changed, any private action must be voluntary.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:15 US June ADP Employment Change
08:30 Canada May New Housing Price Index, Initial Jobless Claims, Continuing Claims
10:30 DoE Natural Gas Inventories
11:00 DoE Crude Oil/Gasoline/Distillate Inventories, US Treasury note announcement
Todays Headlines
7:00:02 AM
*(US) MBA MORTGAGE APPLICATIONS W/E JUL 1ST: -5.2% V -2.7% PRIOR
- Refi's: -9.2% v -2.6% prior.
- Avg Rate on 30y mortgage: 4.69% v 4.46% prior.
- Purchase Index: (Seasonally adj): +4.8% v -3.0% prior.
7:45:06 AM
(US) ICSC/GS weekly chain store sales w/e July 2nd: +1.5% w/w; +3.5% y/y
- Guides June SSS outlook higher slightly to +3.5-4.5% incl fuel, +2.5-3.5% ex-fuel (prior +3-4% incl fuel, +2-3% ex-fuel)
7:56:41 AM
Goldman remains bullish on oil services/drillers as Q2 2011 earnings approach
- RDC rated Neutral, price target $50
- Firm remains bullish on oil services/drillers as Q2 2011 earnings approach.
10:24:50 AM
(EU) Moody's summarizes expectations for Europe stress tests from the EBA; sees 26 banks failing stress tests
- Notes 1/3 of the 91 banks could fail the stress tests vs the 15% expectation last week from financial press citing sources (15 of the estimated 91 banks)
11:26:02 AM
(EU) EU regulator Barnier notes that a suspension on ratings from ratings agencies could be implemented for those countries receiving bailouts
- Reminder: The EU commission earlier had called for a break up of ratings agencies and claimed ratings agencies are generating uncertainty, not clarity; noted Moody's Portugal decision highlights the questionable decisions of the ratings agencies
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
“Many persons have a wrong idea of what constitutes true happiness. It is not attained through self-gratification but through fidelity to a worthy purpose.”
07:30 US June Challenger Job Cuts
10:00 US June ISM Non-Manufacturing
11:30 US Treasury 4-week bill auction.
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
6:09:29 AM
*(BE) BELGIUM DEBT AGENCY TO SELL APPROX €2.8B v €2.5-3.0B INDICATED RANGE IN 3-MONTH AND 6-MONTH BILLS
- Sells €1.21B in 3-month Bills; Avg Yield 1.313% v 1.254% prior; Bid-to-cover: 3.0x v 4.63x prior
- Sells €1.61B in 6-month Bills; Avg Yield 1.403% v 1.340% prior; Bid-to-cover: 2.6x v 2.55x prior
6:16:45 AM
*(PO) PORTUGAL MAY INDUSTRIAL SALES M/M: +3.8% V -8.2% PRIOR; Y/Y: 7.4% V 7.1% PRIOR
- Prior MoM revised lower from -7.5% to -8.2%
- Prior YoY revised lower from 8.0% to 7.1%
6:18:40 AM
(GE) German 2011 GDP might be revised higher above prior Gov't forecast of 2.6% - financial press govt budget draft
- 2011 exports to be much less than year-ago levels
- Anticipates 2011 budget deficit to fall below 2% of GDP
10:20:07 AM
(NZ) Fonterra Global Dairy Trade auction: Dairy Trade price index -6.7% from prior auction on 6/15 (-2.6% prior)
- Average winning auction price: $4,017/metric ton v $4,324/metric ton prior
- Whole milk powder: -6.8% v +2.6% prior
- Anhydrous milk fat: -1.4% v -5.9% prior
2:03:02 PM
*(PO) MOODY'S DOWNGRADES PORTUGAL FOUR NOTCHES TO Ba2 from Baa1, now JUNK STATUS; outlook Negative
- Downgrades cites: The growing risk that Portugal will require a second round of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a pre-condition.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
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