The Banking and Strategy Initiative

Chillin' out till it needs to be funded

IT’s MoNDaY again! The Week Ahead (US Economy and Markets) on Monday Jun 03 – June 07, 2013: Anti Cancer after the big Diabetes push, Banks wink to a strong Q2

If you are still looking for Diabetes treatment led moves in the Pharma industry, the revolution has moved on, though Pfizer and Novartis seem not so surprisingly to have missed the bus again. Merck’s (US: MRK) melanoma success rate hit 30% on its anti colon cancer drug that will compete with Bristol myers Squibb’s novolumab, both companies up 4% and 3% in pre open as Markets look to wipe out Frday’s fracas like closing. Pfizer’s (US:PFE) drug Xalkori targets Lung Cancer but seems to have more boutiques coming into orbit directly ahead and is worth just 450 mln to PFE Meanwhile intel is thrashing around with news of a new chip to bring it bak into high tech acceptance range

European ships finally sailed on the high seas again in May with end of month PMI data almost rocketing ( seems like it) to near 47 levels across Spain, Itaaly, France and Germany(49.4) to take the European index to above 48, an improvement that augurs well for the Euro, while Japanese data was sluggish letting Koruda pick up the slack leading yen back to almost below 100 as China offered up another sub 50 PMI ahead of May auto sales data which edmunds informs us looks like Ford has run up another 15% and GM and Chrysler have followed with 5% and more in gains over last May even as imort prices seem to be the only positive inflation reading as global markets ooking at positive European data changed course after open struck London like QE was never sailing again. Low inflation may stagger the fed’s targets for tapering the QE juggernaut sufficiently as a 2% let down in unemployment is still unlikely and looks only half the improvement Fed has promised . Inflation hit a poor 1.2% last week’s reporting leaving a big gap even as the banks’ warnings about the persistent low rates hurting profits and struggling NIMs are unlikely to be shored up by the currently jumping US bond yields, Banks seem to be toke up on assets on the short side and instead of earning from the term structure finally trying to move up their NIMs are likely to continue to get hurt in lending spreads thru 2013 as a corollary to all the capital increases and easy liquidity of the last 4 years Draghi will go ahead with a cut in forecasts later this week

Goldman Sachs did pay a token fine for a trader running amok on the CME last year but other banks seem headed to a great Q2 performance with HAMP reinstated by the US Government for another 18 months till the end of 2013 and evident from the rosy uptick in trading and mortgage lending thru the first two months of the quarter. Maybe consumer credit data later in the month will reflect the truth as the week has more retailers like Dollar General and coffeemaker JW Smuckers reporting the quarter while WALGREENS joins others in giving the current situation updates for Q2.

Ben Bernanke and Janet Yellen did not ruffle many feathers in their speeches on Sunday at Princeton and Shanghai. US will be introucing a liquidity measure later this year even as the TBTF Act gets drowned by the big move by Gang of 8 on immigraton reform this month( look for senator schumer’s pensmanship and more about the South Border with Mexico and Amnesty ). The TBTF Act looks to add a equity only 15% capital limitation for the Big Banks with more than $500 B in assets. Also if Federer does not lose to David Ferrer he may look to one more Grand Slam Final though a resurgent Nadal is likely hitting a snag with in form Djokovic next after Nishikori and Gasquet/Wawrinka. Maria Kirilenko meanwhile is facing Victoria Azarenka another strong ‘newcomer’ in her half of the ladies’ line up

Korea, Turkey, Thailand and Indonesia started the fundamental loop of lacking strength even as the noise around QE remains the important mainstay of market debates as muted inflation means more to add to th bucket of woe as a flash crash awaits on the pr announcement of QE withdrawal before 2013 is over. RBA will follow up with a 25 bp rate cut after one in April to match the momentum from a strengthening dollar even as US and Japan look ahead to a weaker dollar and Yen data with inflaton just 1% in Korea and near zero in Turkey as Turkey fell 8% on ongoing protests against Erdogan’s government in Istanbul’s own Taksim square while China has just about procured its first Dreamliner(787) probably headed to its own research units to explore their next manufacturing unit next

Chrysler reported a 11% jump to 166k units at 8 am, the big three all reporting a jump in polished Trucks for the home and hearth in May again an ISM fr manufacturing looking to reawaken the recovery before rest of the data. US Trade data ater in the week is not expected to be any sunnier having peaked at a ow deficit of $37-38 Bln last few months and stocks seem bound to retreat thru the week fter a big Monday Bang before the good news from the Jobs Friday

God’s recovery is unlikely the story this month but its off its lows


Pfizer (Photo credit: Walt Jabsco)

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