The MorningSnapshot- 06/27

The MorningSnapshot
June 27, 2012

Morning Commentary
Sentiment is fairly bright this morning with stocks in both Europe and Asia climbing for the first time in five days as investors speculate that China will commit to further easing and after Italian bond prices gained after a successful debt auction. Italian and Spanish borrowing costs are lower overnight, even after Italian yields rose at an auction of six-month bills, and stock indices are higher with the Euro Stoxx 50 up +0.79% led higher by Italy’s FTSE MIB up +1.24%. S&P 500 futures are up +0.212%, and the EUR/USD cross is consolidating in a downtrend ahead of the EU summit this week.

Bank of International Settlements Warns Central Banks
According to the Bank of International Settlements (BIS), the hard-won credibility and independence of the world’s largest central banks are under threat by the growing dependence on easy and abundant supplies of cash made available by governments and financial markets. “Simply put: central banks are being cornered into prolonging monetary stimulus as governments drag their feet and adjustment is delayed,” BIS said, warning that this “intense pressure puts at risk the central banks’ price stability objective, their credibility and, ultimately, their independence.”

“A vicious circle can develop, with a widening gap between what central banks are expected to deliver and what they can actually deliver. This would make the eventual exit from monetary accommodation harder and may ultimately threaten central banks’ credibility,” BIS said, adding: “If central banks’ credibility were to be eroded and inflation expectations were to pick up, it would be very difficult and costly to restore price stability, as the experience of the 1970s has shown.”

Today’s Economic Data Lineup (EST)
7:00 am: MBA Mortgage Applications, June 22 (prior -0.8%)
8:30 am: Durable Goods Orders, May, est. 0.5% (prior 0.0%)
8:30 am: Durables Ex-Transportation, May, est. 0.7% (prior -0.9%)
8:30 am: Cap Goods Orders Nondef Ex Air, May, est. 1.7% (prior -1.9%)
8:30 am: Cap Goods Ship Nondef Ex Air, May (prior -1.4%)
10:00 am: Pending Home Sales M/m, May, est. 1.9% (prior -5.5%)
10:00 am: Pending Home Sales Y/y, May, est. 9.9% (prior 14.7%)
11:00 am: Fed to purchase $1.5-2.2b notes in 2/15/2036-5/15/2042 range
1:00 pm: U.S. to sell $35b 5-yr notes

North America

  • Durable goods orders in May climbed more than forecast, easing concerns regarding a slowdown in U.S. manufacturing. Bookings rose +1.1%, the first increase in three months.
  • Wheat hit a nine-month high amid speculation that the demand for grain to feed livestock will increase as corn prices continue hitting highs.
  • The U.S. Congress said it is considering delaying budget cuts until March.
  • The Conference Board’s June Consumer Confidence Index fell to its lowest level since January this year with the index coming in at 62 versus the 63 as forecast by economists.
  • U.S. residential real-estate prices fell in April at their slowest pace in over a year, giving weight to the theory that the housing market is stabilizing. The S&P/Case-Shiller index of home values in 20 cities dropped -1.9% after decreasing -2.6% per year in March. Economists had predicted a drop of -2.5%.

Europe

  • Merkel again stated euro-area bonds were a “wrong way” to achieve the greater European integration needed to stem the debt crisis. This statement came just three hours after Spanish Prime Minister Rajoy made a plea for European leaders to use all tools available to help Spain shore up its finances.
  • Italy sold treasury bills for 2.957%, up from 2.104% at the most recent sale of similar maturity debt on May 29, and investors bid for 1.62 times the amount offered. The Italian 10yr yield fell -8bps after the successful auction.
  • New Zealand’s trade surplus contracted during May as the biggest jump in imports since November, led by crude oil, outpaced gains in shipments abroad.

Asia

  • South Korean manufacturer confidence dropped to a four-month low.

“You can stand tall without standing on someone. You can be a victor without having victims.”
-Harriet Woods
____________________________
Taylor Anderson
Business Analyst
Clearing House

T 312 634 8902
F 312 930 3187
C 312 618 8339

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