Chillin' out till it needs to be funded
Trade Balance data from Italy dropped $0.7B to a few millions in deficit as the Export markets in EU have held on month but are down 5% for the year from previous April. Imports fell 9.3% on year but were up 2.5% over March and inflation was holding at above 3% so the Italian recovery seems to be in place. UK deficit for the month jumped to GBP10 B probably as Exports to the South fell on weaker demand. Overall EU exports continued to lend a larger surplus to the Trade Balance having grown 6% on year but largely as imports fell more than exports over March. EUR 21.6 B in the surplus was marked to the German Economy (Seasonally Adjusted Data)
Back in the US, Foreigners bought a slower but steady $26 B of US Securities but US residents were not buying much of Foreign Securities That data may look a decrease from March $36B inflows but it is actually a pretty good score on the trot. With Capacity Utilisation at the 79% watermark, the 0.1% decline in production was exceptionally worrying for us hoping to a 3% recovery in the US economy this year, with Retail sales marking a 3% consistent growth
Equities rallied on Coordinated Central Bank intervention buzz and around 11 there was more on ECB likely to breach the 1% floor on interest rates to fuel the Euro to high 1.2650 levels , but the realisation that any rally would bear tragic consequences on Monday kep the Dollar index still above 80 at 81.5, in fact the Aussie breached parity and balanced the Euro’s incessant recovery after the Spanish bank handouts were quasi approved and Germany moved on its stance on banking unions for the Eurozone (Money has not left Europe yet – A Bloomberg banner with CS analyst B Baweja)
Greece may be undecided: about a government that is as the likely supporters of the bailout and the likely winners New Democracy will not get a majority and a coalition may fall apart in another 2-3 months. However a relief rally on the Euro is unlikely and even though people may like shorting the Euro as turmoil continues to get it below 1.26 again would take an immediate breakdown, a Greek tragedy unlikely with Man’s peculiar brand of politics and thus non expectations there from
FOMC meets on Tuesday and when it reports on Wednesday it may talk about emergency lending programs to other Central Banks and keeping the $866B MBS stock in its assets for a longer time with low interest rates a certainty for now.
Housing Data is going to be busy from Monday with the Housing Market Index, the Housing Starts on Tuesday and Existing Home sales on Thursday. However with the Empire state index barely positive and down 13 points from April, it is unlikely that housing either will deliver any positive surprises.
Chinese data follows Ben Bernanke’s announcement and press conference on Wednesday afternoon followed by a surfeit of Bad news from throughout Europe and Canada as May was exceptionally harsh for the PMI reports even in Services before the German Ifo survey allos everyone to take a definitive call ont he depth and length of the crisis left to endure
Thursday reports fromt he Fed are unlikely to throw any surprises esp after the FOMC though the Leading Indicators, the Natural Gas report and the Housing Price Index may be looking North again