April 26, 2012
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.
Today’s Economic Data Lineup (EST)
8:30am: Chicago Fed, March
8:30am: Jobless Claims, week of Apr. 21., est. 375k (prior 386k)
8:30am: Contin. Claims, week of Apr. 14, est. 3293k (prior 3297k)
9:45am: Bloomberg Consumer Comfort, week of Apr. 22
10:00am: Pending Home Sales (M/m), Mar., est. 1.0% (prior -0.5%)
11:00am: Kansas City Fed Manf. Activity, Apr., est 7 (prior 9)
11:00am: Fed to purchase $1.5b-$2b notes in 2/15/2036 to 2/15/2042 range
1:00pm: U.S. to sell $29b 7-yr notes
- Treasury Secretary Timothy Geithner said he believes the U.S. continues to face risks from the “severe and protracted crisis” in Europe and that the confrontation with Iran “…has added upward pressure on oil prices,” in prepared statements yesterday in Portland, Oregon. Although he noted that the economy is “gradually getting stronger,” he also warned that the U.S. faces a “fiscal cliff,” referencing the simultaneous expiration of the Bush tax cuts and across-the-board cuts in spending.
- Iran is considering a proposal from Russia that would halt its nuclear program in order to avoid new sanctions, including a EU ban on crude imports scheduled to be enforced in July. Oil prices dropped by $1 immediately following the release, but wound up higher on the day.
- An index of executive and consumer sentiment in the euro-area fell to 92.8 from a revised 94.5 in March; economists had forecasted a drop to 94.2.
- Five months after Hungary’s Prime Minister first appealed to the EU for a bailout, the European Commission has now given the go-ahead to Prime Minister Viktor Orban to pursue a financial-aid package. Talks are sure to begin shortly on a joint program from the EU and IMF that would help shore up the finances of the indebted nation, currently carrying a junk credit rating.
- The EU is seeking to boost its budget +6.8% totaling $182B in 2011 in order to support growth measures. This would require member nations to contribute more cash at a time of austerity and recession.
- Yesterday in Berlin, German Chancellor Angela Merkel backed a call by ECB President Mario Draghi for European leaders to widen the scope of their response to the debt crisis beyond cutting debts and deficits; both Merkel and Draghi are pushing leaders to make structural reforms that will spur economic growth.
- The BOJ is expected to expand its asset-purchase program at tomorrow’s board meeting.
“The only thing that stands between a man and what he wants from life is often merely the will to try it and the faith to believe that it is possible.”
-Richard M. DeVos
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