Sentiment Mixed Before Chicago PMI, Consumer Confidence, and Fed Officials

The MorningSnapshot
June 28, 2013

Yesterday’s Wrap-Up
Treasuries and equities rose as May personal income climbed +0.5% versus the median estimate of 0.2%, while personal spending matched estimates at 0.3%. The gains come after Wednesday’s dismal GDP numbers that the market ignored, and yesterday the S&P 500 moved higher by +0.62% and the 10yr Treasury fell -6.13bps to 2.474%. Initial jobless claims came in at 346K compared to the estimate of 345K; the prior period was revised higher by +1K to 355K. The Fed’s Dudley, a steady dove, said QE may be prolonged if the central bank misses forecasts (which it does more often than not). Gold tumbled -2.3% to $1,202, nearing a 34-month low, while crude oil rose +1.5%.

Morning Commentary
Sentiment is mixed this morning, with risk-on trades dominating in Asia and risk aversion taking hold in Europe after the FT reported that Greece’s second privatization was at risk.  The Euro Stoxx 50 was down -0.4%, consistent with widening sovereign debt spreads in the area to the German Bund. Domestically, S&P 500 futures are +0.3% higher before the Chicago PMI and Consumer Confidence data points are released. Treasury yields are declining, extending losses from the highest levels since 2011, with tens falling -2bps to 2.45%. Commodities are mixed with oil and copper gaining nearly +0.3%, while gold continued testing a 34-month low. The dollar index is nearly flat while the euro gains slightly and the yen is weakening above the 99 level. Investors will be listening to the Fed’s Stein and Williams, who are both set to speak about monetary policy separately today.

Today’s Economic Data Lineup (EST)
8:00am: Fed’s Stein speaks on monetary policy in New York
9:00am: NAPM-Milwaukee, June, est. 45.2 (prior 40.67)
9:15am: Fed’s Lacker speaks on economic outlook in White Sulphur Springs, W. Va.
9:45am: Chicago Purchasing Manager, June, est. 55.0 (prior 58.7)
9:55am: University of Michigan Consumer Confidence, June final, est. 83.0 (prior 82.7)
11:00am: Fed to purchase $1.25b-$1.75b debt in 2036-2043 sector
3:30pm: Fed’s Williams speaks on monetary policy in Sonoma, CA

North America

  • The CFTC (finally…) yesterday filed civil charges against MF Global’s former CEO Jon Corzine and former executive Edith O’Brien, stating Mr. Corzine “bears responsibility” for the firm’s demise. The agency is seeking monetary penalties and to ban the two from the commodities industry as a whole. In the CFTC’s 47-page complaint, Jon Corzine is depicted as instrumental in making decisions that put customer accounts at risk by moving money in violation of rules prohibiting such transfers.

Europe

  • German retail sales climbed +0.8% from April, when they fell a revised -0.1%, and compared with estimates calling for a rise of +0.4%. The report follows separate economic data points showing German unemployment declined unexpectedly in June, while a measure of business confidence climbed for a second month.
  • U.K. home prices rose for a second month in June on higher mortgage availability, with prices rising +0.3% from the prior month when they advanced +0.4%. The average price last month was £168.94K, up +1.9% YoY.
  • Greece faces collapse of second privatization, FT reports,  as Emma Delta, the only bidder for the country’s 33% stake in OPAP, wants to cancel two elements of the deal agreed last month.
  • ECB Executive Board member Joerg Asmussen played down reports that said officials at the ECB are considering a policy of QE in the euro-region, saying “I can’t rule out that inside a large organization, someone is thinking about something, but that’s not policy-relevant,” in an e-mail to Bloomberg News.
  • A June 26 proposal from EU leaders dropped a commitment from earlier drafts for euro-area states to put “credible backstops” in place for restructuring and recapitalization before the ECB conducts asset-quality reviews of lenders prior to taking command of oversight of banks in the currency bloc in 2014. Instead, governments should “make all appropriate arrangements” before the ECB reviews. Also left out was language describing the ECB balance sheet reviews and subsequent stress tests as “particularly important to complete the process of strengthening bank balance sheets.” Germany led calls to limit troubled banks recourse to government funds, securing commitments that private investors should absorb losses before governments or the ESM.

Asia

  • Chinese central bank Governor Zhou Xiaochuan said the nation will maintain market stability and adjust policies at the    right time, his first comments since a record cash squeeze hit the world’s second-largest economy.
  • Japanese CPI excluding fresh food was nearly unchanged from a year earlier as a weakening yen sent utility costs higher at the fastest pace in nearly five years, with prices ex food and energy falling -0.4% in May YoY. Industrial production rose +2% in April driven by demand from power companies, while retail sales gained +1.5% from the previous month.

“Our business in life is not to get ahead of other people, but to get ahead of ourselves.”
-Maltbie D. Matlock

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