The Banking and Strategy Initiative

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US Economy and Markets ( The Week ahead: July 28 – August 01, 2014)

It’s Monday Again! China scores a perfect 10, The Euro bottoms out and the US trudges on

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We Indians do not have a favorable view of anything at least according to reported data!!

Retail sales were low last week, as the GS Chain store sales report showed losing traction but Durable orders made up for it and the Housing dat at its lowest in the New Home Sales report, gave many a sanity check even as Mortgages and Developer loans (CRE) finally start a coming together accelerating the not so vaunted come back for the US economy but urgent nevertheless with investors on the sidelines for more than 5 years and RMBS loses mostly penalised by the USAG except for the famous few still holding out. The Flash reports from China climbed clear of the 47s and the 49s to a nice 52 for manufacturing in the month of July, a big high for Big brother since the crisis began in 2008 and yet unlikely to last for more than a couple of months

China’s Flash PMI was 52, and in almost equally good news and probably as worthy, the penny traders at Family Dollar and Dollar Mart got together in a purchase worth a¬†ginormous $48 Bln and Glaxo and Reckitt Benckiser joined in what we suggested was a big year for Wheeling Dealing Big Pharma, looking to hide the patent cliff under an equal barrage of new patents ( Pfizer, Merck) and deals across the pond and on it with Abbvie completing last week and J&J , Novartis chewing on more than one deal each.

We for one dont think The Pound (GBP) is over extended at all but something must give as the Euro finally broke down to 1.34 levels and quite inexplicably the barrage of investments into US bonds continued even as Passive and FI funds (Investment grade) start reporting big outflows from bond funds. Ten year yields are still trading at all time lows and the European Investment grade sovereigns remain in big demand as well, the PIOIGS debt following on its recent comeback in close catchment to the Spanish and the investment grade edebt of the Euro zone sovereigns still far from righting the ship after growth momentum broke before summer and the amount of money chasing up the Euro as a safe haven easily belittling the puny measures by the ECB to provide liquidity in the zone to get credit into positive growth

This weeks data reporting includes more waiting with bated breath for the new benchmark jobs report hoping for another 300k and a continuing upside in equities, Friday correcting in a rush to easy up the momentum for the week to start positive on Monday

The Housing data this week will continue positively despite the shock from the New Home Sales report as progress in Home Sales has ccrossed to the Midwest, a report likely confirmed by the 20 city data in the Case Schiller indices tomorrow. The West and the South remain at high priced levels and may also start slowing down in price increases reported but the North East is reporting better data

The GDP data is reported on Wednesday and the Chicago PMI report with the Auto Sales data report on Thursday and Friday close out the week on a high note but not as high as April, at least on the PMI data

 

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This entry was posted on July 28, 2014 by in Uncategorized.

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