Chillin' out till it needs to be funded
Though Thursday Morning’s curtain raiser on Q2 GDP performance for the US could dampen the hearts of a few on the street worried by various Fed utterances after Q1 GDP reported a lower 2.4% on the second estimate, the month of May has mainly gone by without accident, Dow closing at 16354 on Thursday and the S&P 500 also quoting positive territory.
After another round of auctions of Short Treasuries and 5 yr Bonds on Thursday, however, US Bond yields were firm, the 30 year yield at 3.29% and the 10-y yield at 2.12%. Also the Euro had finally come back in the week from 1.28 levels to cross 1.30 yesterday and the Yen seems to have bottomed out after a flurry of JGB buying triggered by Minister Amari and Governor Koruda was stopped by Japanese Financial institutions confirming their stable mood and going lighter on their Japanese bond holdings.
Friday’s inflation data is likely to remind Fed watchers that despite comments from Rosengren and others, Rosengren’s optimism on inflation remaining below 2% particularly in point, the Fed is unlikely to get its desired 3 month segueway to “Fed Tapering”. To boot, you hav to understand that thru April the Fed Committee was optimistic on US data as the rest of us, only because many had not considered the probability of inflation falling precipitously lower as it did. As retail sales yesterday refused to get closer to a healthy growth more Fed members are likely to realise that Ben Bernanke would also prefer a basic minimum on inflation before starting any action reducing Fed purchases consequently. As is already evident, any such Fed program for withdrawing what it now considers excess liquidity cannot be dictated by market worries over it but also cannot kick off if the inflation falls below its target of 2% by a long way as it is likely to confirm on Friday. The weekend is , a little cynically, already looking good for Asia as the Yen uses this weakness in the Dollar in an already estabished downward trend for its currency, it was able to resume from around 100.7 levels.
Brazil’s troubles with stagflation triggered off extreme measures of austerity yesterday too as growth continues to be tepid in Brazil, Latam and even most of the emerging world in wait of improving trends by the end of 2013. China’s 7% plus growth is enough and Canada and Australia seem to be more at risk of the continuing pressure on growth even as India gets ready to report a likely last muted series of data in Q4 GDP and Banking and Financial services growth emulates the coming uptick in growth as business investment in the Economy is stabilised
Sony is up in morning trades in Tokyo, though Japanese comeback off Abenomics was conspicuous by its absence in economic data and April data led by inflation spiralled to a further -0.7% after household spending growth was muted at 1.5% and Industrial production barely credible at 1.7% bringing forth fears raised by Koruda on lack of monetary transmission being completed by banks because of low revailing rates, but that edifice again may still give a chance to Abenomics as peremptory JGB buying is outwitted as trade and exports of auto and electronics to neighbour China recover.