June 29, 2012
After the agreement out of the EU summit that will have EFSF/ESM directly recapitalize Spanish banks, sentiment took a turn towards significant improvement. EU sovereign spreads to bunds are moderately to extremely tighter, while the Euro Stoxx 50 as well as S&P 500 futures are considerably in the green. Most commodities are also moving higher this morning, led by WTI Crude up +3% on the day, while the USD and JPY underperform in overnight price action versus most peers.
Today’s Economic Data Lineup (EST)
7:00 am: Fed’s Rosengren speaks on banking crisis in Amsterdam
8:30 am: Personal Income, May, est. 0.2% (prior 0.2%)
8:30 am: Personal Spending, May, est. 0.0% (prior 0.3%)
8:30 am: PCE Deflator M/m, May, est. -0.2% (prior 0.0%)
8:30 am: PCE Deflator Y/y, May, est. 1.5% (prior 1.8%)
8:30 am: PCE Core M/m, May, est. 0.2% (prior 0.1%)
8:30 am: PCE Core Y/y, May, est. 1.8% (prior 1.9%)
8:30am: Fed’s Dudley speaks in Puerto Rico
9:45 am: Chicago Purchasing Manager, June, est. 52.3 (prior 52.7)
9:55 am: University of Michigan consumer sentiment, June final, est. 74.1 (prior 74.1)
NAPM-Milwaukee, June, est. 55.2 (prior 57.7)
12:05 am: Fed’s Bullard speaks on U.S. economy in Arkansas
11:00 am: Fed to purchase $4.25-5.25b notes in 6/30/2018-5/15/2020 range
EU Summit continues in Brussels; will discuss Spanish bank bailout package
Germany’s Lower House votes on EU fiscal pact
- Consumer spending stalled in May as slower job gains and a lack of wage growth continue keeping American’s wallets in-check. Purchases were unchanged, the weakest since November, after a +0.1% rise in April.
- The U.S. Supreme Court decided yesterday by a 5-4 vote to uphold the main tenants of Mr. Obama’s health-care overhaul, giving him an election-year triumph and preserving most of a law that would transform an industry making up nearly 18% of the nation’s economy. Apparently it is completely constitutional for Congress to have the power to require Americans to carry health insurance, or pay a penalty. GOP congressional leaders have organized another vote to repeal the law on July 9.
- JPMorgan tumbled more than -6% yesterday after the New York Times reported the bank’s losses from credit derivatives could easily total as much as $9B, vastly exceeding the firm’s initial estimates. On May 10 CEO Jamie Dimon said the bank had lost more than $2B on bets in credit markets taken by its chief investment office in London and that an additional $1B in losses could occur this quarter.
- U.S. GDP figures were in line with both estimates and previous calculations by the government, showing growth at 1.9%.
- Unemployment figures released yesterday indicate a continuing weakness in the U.S. labor market; initial claims were reported at 386K, slightly higher than forecasted by economists.
- Merkel gave in on expanded steps to stem the debt crisis; after over 13 hours of talks in Brussels today, euro leaders dropped the requirement that taxpayers get preferred creditor status on aid to Spain’s crippled banking system. They also cleared the way to begin recapitalizing lenders directly with bailout funds once Europe sets up a single banking advisor.
- Industrial output in Japan fell the most since the March 2011 earthquake and consumer prices declined, bolstering the case for more stimulus to sustain the nation’s economic recovery. Production declined -3.1% in May from April; consumer prices excluding fresh food fell -0.1% in May from one year ago.
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