The Banking and Strategy Initiative

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US Economy & Markets – The week ahead (August 25, 2014 – August 29, 2014)

It’s Monday Again! Big Banks and Wall street back in fashion by early 2015, Tim Hortons to make your Whopper!

New Home Sales had taken the bottom out of the market last month and are not expected to report any thing better for July in a couple of hours from now as China drags down hopes for any economic miracle to follow the continued buoyant US Economic prognosis and a continued 3% score card for GDP growth with Europe trundling down to negative growth on mostly expected lines , France still a positive surprise till now and for the rest of 2014 and 2015 at 0% growth

Month end data could however be excused with the Chicago National Activity index no longer looking so bleak and the Chicago PMI coming in on Friday just off new highs in April and still above 60. New Home Sales of course would be just a bare 400k even as Bank of America signed the mostly expected $10 Bln penalty to scrape through its last big stand off with a $17 Bln settlement, down to $16.67 Bln for show and including the fat penalty wiping out most of its profits in the last three years the popular press has been quick to point out. Retail Banking fees and charges continue to bring in more than $2 , closer to $3 Bln for a quarter and the bank is obviously not going to be in trouble for much more though the housing market remains abit dull and the shorts are going to be difficult to fend off after a longish rally from below book value  and many funds ready to move on to better picks int he segment, not excluding Wells Fargo or even the erstwhile Mid cap US Bank. Time for a Buffet deal?

US and India GDP data among others is out on Thursday, but the Case Schiller, the FHFA Price Index and even the Durable goods Orders report could well be ignored by markets not expecting any positives and the EIA report likely confirm a seasonal uptick in demand mid week. Long term Bonds are likely headed to super low yields forcing the Fed’s hand once the new unemployment normal reaches near 4.5% levels or even before that in mid 2015. That means a lot of good valuation is coming to equities as most debt and bond categories have been expecting a change of scene that is not looking to happen quite so given the losses bond investors face on a rising interest rate scenario

Pharma business also gets to be in the lime light with Roche completing multiple deals this quarter and the sector deal volume hitting a high note at $ 5 Tln and $34 Bln in fees alone except in Asia. Roche’s intermune acquisition joins Genentech in the new drug portfolio companies for the US major and awaits news of its acquisition in Japan worth $10 Bln in Chugai of which it already owns 60%

Meanwhile back in Asia, things are getting tough for all of China’s neighbours as economic growth sputters again in big brother China and the South China Sea becomes a hotspot

The Euro in the meantime is headed to new lows after breaching $1.32 early and will likely cross back to below $1.30 levels and then some as European Banks get into a place of comfort with the latest round of easing now just around the proverbial corner. Gold and Oil stay under the weather as the rise in US demand still cuts no ice for the Brent prices that hit $101 before lazily holding up $102 last week

In late breaking news from Reuters insider, Burger king, the house of the Big whjopper and twice whooper of PE investors, is moving on Canadian chain Tim Horton’s

 

 

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This entry was posted on August 25, 2014 by in Uncategorized.

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