August 30, 2012
Equities in the U.S. rose yesterday, halting a two-day drop, and Treasuries fell after American economic growth was revised higher and as investors await Chairman Bernanke’s speech on Friday. Additionally, in the Fed’s Beige Book business survey most regional Fed banks reported employment was “holding steady or growing only slightly.” 10yr Treasuries tested their 50% retracement level at 1.63% overnight, and were up +2bps to 1.652% in late afternoon trading. European stocks fell for a second day amid earnings reports and the battle over whether or not to give the region’s bailout fund a bank license that would boost its bond-buying capacity. S&P lowered its rating on Illinois GO (general obligation) bonds to A from A+ and left their outlook negative, citing “pension funding” and a lack of reform.
Sentiment is mixed this morning as the Fed’s Jackson Hole conference begins, with Bernanke scheduled to speak at 10am EST tomorrow; analysts and strategists do not anticipate Bernanke signaling imminent policy moves. Globally, equities are lower on the day while treasuries are gaining. U.S. 10yr Treasuries are again testing the 50% retracement level in the 1.63% range, while euro-area sovereign debt spreads to German bunds are widening modestly. Energy and metals are trading higher, while ags are mixed in mostly moderate ranges on the day.
Today’s Economic Data Lineup (EST)
8:30 am: Personal Income, July, est. 0.3% (prior 0.5%)
8:30 am: Personal Spending, July, est. 0.5% (prior 0.0%)
8:30 am: PCE Deflator M/m, July, est. 0.1% (prior 0.1%)
8:30 am: PCE Deflator Y/y, July, est. 1.4% (prior 1.5%)
8:30 am: PCE Core M/m, July, est. 0.1% (prior 0.2%)
8:30 am: PCE Core Y/y, Jul, est. 1.7% (prior 1.8%)
8:30 am: Initial Jobless Claims, Aug. 24, est. 370k (prior 372k)
8:30 am: Continuing Claims, Aug. 18, est. 3.307m (prior 3.317m)
9:45 am: Bloomberg Consumer Comfort, Aug. 26 (prior -47.4)
11:00 am: Kansas City Fed Manufacturing Activity, Aug. est. 3 (prior 5)
TBA: ICSC Chain Store Sales Y/y, Aug. (prior 1.9%)
11:00 am: Fed to purchase $1.5b-$2b notes 2/15/2036-8/15/2042
1:00 pm: U.S. to sell $29b 7-yr. notes
- Jobless claims were little changed at 374K for the week ending Aug. 25, matching the upwardly revised figure from the prior week and coming in slightly higher than the median estimate of 370K.
- Commerce Department figures released today show consumer purchases increased +0.4% after being little changed in June, and incomes climbed +0.3% for a third month.
- Consumer confidence in the U.S. held near a seven-month low last week as Americans’ view of the buying climate fell to the lowest level of the year. The Bloomberg Consumer Comfort Index was little changed at -47.3 in the period ending Aug. 26, from the prior week’s -47.4 reading that was the weakest since mid-January.
- Hurricane Isaac soaked residents along the Gulf Coast, but only caused a fraction of the damage expected by some insurers.
- Economic confidence in the euro area fell more than forecast by economists in August as leaders struggle to reign in the debt crisis. An index of executive and consumer sentiment dropped to 86.1 from 87.9 in July, the lowest level since Aug. 2009; economists had called for a decline to 87.5.
- ECB President Mario Draghi has scrapped plans to join a public debate with lawmakers next week on measures to bolster the euro. The plan was changed because senior ECB officials do not traditionally comment publicly on policy in the week before a Governing Council meeting, according to a spokesman.
- Jobless claims in Germany rose for a fifth month in August, with the number of people out of work increasing a seasonally adjusted 9K to 2.9M in August; economists had anticipated a 7K increase.
- Italy sold €2.5B of 5yr notes towards the top end of their target and at an average yield of 4.73% versus 5.29% at a previous auction of similar maturity.
- Chinese Premier Wen Jiabao told Angela Merkel that Spain, Italy, and Greece must take steps to prevent a worsening of the region’s sovereign debt crisis, and he pledged to consider further European bond purchases. “The main worries are two-fold: First is whether Greece will leave the euro zone,” Wen said after meeting Chancellor Angela Merkel in Beijing, a pool report showed. “The second is whether Italy and Spain will take comprehensive rescue measures. Resolving these two problems rests with whether Greece, Spain, Italy and other countries have the determination for reform.”
- A government report today in Australia underscored a slowdown in the nation’s housing market, with building approvals tumbling -17.3% in July from June, the most in almost a decade. A separate report showed that business investment rose +3.4% in the 2Q from the prior three months, less than half of the prior gain.
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