The Banking and Strategy Initiative

Chillin' out till it needs to be funded

US Economy & Markets: The week ahead (June 30 – July 3rd, 2014)

Its still Monday! Holiday shortened week, sees a lot of record taking of new recovery

The shortened week of course had some bright spots already with the Chicago PMI peaking at 70 in the Production sub index implying the Chinese data magic will last the entire month even as New Orders and Orders backlog pointed to the May high of 65 being the Chicago index’ best performance to come past in May 2014. China’s 50.8 Flash data Sunday last was also confirmed overnight as holidays take over the middle class American household again and inflation data and retail stores confirmed an early uptick last month allowing the world at large to wait on holiday sales data thoughh it won’t be the big deal Christmas was. Auto sales have run up an annualized run rate of 17 mln, data to be confirmed today for June 2014 and Oils brief run up was nothing to write home about petering into nothingness much like Euro’s brief days of slow realisation as new liquidity never materialized and the new due date from the Central Bank is already up ahead this Thursday.

The other surprise on Monday was in Pending Home Sales which announced a 6% jump breaking the monotonic decrease and an anemic increase last month with a 103 Index score well above the elusive 100 mark. Sales and inventory bettered their scores in the North east and Midwest near their year ago marks after an extended fall through and increased mortgage rates stunted markets last year. The Pending Home Sales indicator is still a low 86 in New York, Boston and surrounding areas. Existing Home prices are still growing b y 5-6% p.a. but are flattening out with the Case Schiller index also growing below expectations at 10.8% this month(June) instead of a 12% p.a. expected rate.

The British economy is set to take over reins of a recovery again after a real let down in inflation and PMI data from Italy, Germany and the Eurozone while the Japanese Yen seemed to have better depreciating days ahead towards the 110 mark after the Tankan industry indices positively beat expectations though big industry incl Services were still dull at higher levels as last month. A new 4.5 multiple limit on new mortgages in England is unlikely to be an inspiration to other national regulators even as UK set down to rein in long standing higher inflation which we still find to be reasonable even at above 3% marks it reached in 2010

The Challenger Job cuts reports start the day on Tuesday before the ADP payrolls and the BLS Official Jobs report on Thursday as 4th of July weekend draws up at the door, with some negative European data likely to keep Friday subdued globally before Markets reopen next Monday.

Thursday is busy as Markets also react to the revived US Services PMI scores and International Trade data for the month

BNP as expected paid a $8.9bn settlement to the US authorities even as India and Mexico reported upbeat data allowing quicker bond and equity investing decisions for the rest of 2014. However, the second half of the year is expected to get tough for Munis even as almost all bond investors are expected to stay with US bonds and Treasuries not allowing any expected uptick in longer term interest rates to start soon even as the Fed aims to keep lower shorrt term rates not convinced of our capped growth at 3% being the best post recovery score for the USA. Growth forecasts for EMs and larger Asian Economies like India have again been re-rated to 6.5-7% levels and equities remain buoyant to cover for the frozen bond investors bearing down on portfolio yields globally.

In deals that fell through, Hillshire brands (Jimmy Dean sausages and  Ballpark Hotdogs) backed out of a deal with Pinnacle foods which had realised it was overpaying for the brands, leaving Tyson foods to take the deal forward at $63. AT&T is still on course to buy DirecTv while it sold its stake in Mexico’s Movil to Slim and GE completed the Alstom purchase last week.

The Foreign Account Tax Compiance Act comes into full force from July 1 and requires foreign banks to hand over data on clients to the US International Revenue Service (IRS), the act still inconveniencing foreign banks like HSBC and Credit Suisse as they revamp their businesses in the USA






This entry was posted on July 1, 2014 by in Uncategorized.


%d bloggers like this: