Sentiment is moderately negative this Monday morning, after Spain reported its economy shrank in Q1, putting the economy in the second recession since 2009, and before the Chicago PMI numbers are released at 9:45am EST. Data out of Asia was mostly worse than estimates overnight, including Taiwan’s GDP numbers, South Korea’s industrial production, and Singapore’s unemployment rate. As if all of this bad news wasn’t painting a clear enough picture, S&P has cut the ratings for 11 Spanish banks citing, “potentially negative implications” from the nation’s downgrade last week. U.S. treasuries gained modestly overnight, with yields consolidating near recent lows on daily charts amid investors concern about EU debt, austerity, upcoming elections, and U.S. growth. The U.S. 10yr is trading down slightly at 1.926%, with futures on the S&P 500 down slightly at -0.094%, and the dollar is strengthening against the majority of its peers. In the commodity space, copper has fallen -0.5%, wheat has fallen more than -1% as U.S. crop development increases, and Brent Crude is heading for its first monthly drop since December.
This week look out for Spanish 5yr note auctions coming up on Thursday, U.S. payrolls on Friday, the French presidential election on Saturday, and the Greek Parliamentary election Sunday.
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Sentiment is surprisingly rebounding this morning after S&P cut Spain’s credit rating two notches to BBB+ yesterday and as Italy failed to meet their maximum borrowing target at a 10yr bond auction. German confidence, French consumer spending, and Spanish unemployment all came in worse than analyst estimates. The one bright data point out of Europe this morning was Italian retail sales beating estimates. The dollar is declining against its G-10 counterparts as S&P 500 futures remain at depressed levels; European stocks are mixed. U.S. treasury yields are reaching new lows since February as investors bid-up “risk-free” securities. Commodities are mixed, with energy falling and metals mostly higher. The yen is stronger this morning after the BOJ increased asset purchases, but only by the low-end of expectations.
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Sentiment is fairly weak this morning after a euro-area confidence index fell more than expected and before U.S. data is released on weekly jobless claims and pending home sales. Stocks, sovereign bond yields, and the euro are all trading lower on the day. The U.S. 10yr is holding near February lows of 1.95% as the Euro Stoxx 50 falls -0.63%, and S&P 500 futures are nearly even at +0.068%.
The FOMC concluded its two-day meeting yesterday and, unsurprisingly, left current policy unchanged. The expectations of five Fed board members and 12 district bank presidents were also released after the FOMC said it expects “economic growth to remain moderate over coming quarters and then to pick up gradually.” Their forecast of the unemployment rate dropped to 7.8%-8% for Q4 2012, compared with previous estimates of 8.2%-8.5% in January. The personal consumption expenditures price index is seen rising 1.9%-2%, versus a gain of 1.4%-1.8% in January. The Fed was also quick to note that, if conditions change, they would not hesitate to implement more stimulus measures “as needed to make sure that this recovery continues and that inflation stays close to target,” Mr. Bernanke said at a press conference following the FOMC meeting.
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