Link to Galbraith’s latest- well worth reading!
link:
Galbraith’s latest!
GE chief gives vent to frustration over China
GE chief gives vent to frustration over China
June 29 (FT) — General Electric chief executive Jeff Immelt told Italian industrialists at a dinner on Wednesday that he was worried about the way Beijing was treating foreign companies. “I am not sure that in the end they want any of us to win or any of us to be successful,” said the man who runs the largest manufacturing company. “After 30 years of progressive market reforms, many foreign businesses in the country feel as though they have run up against an unexpected and impregnable blockade,” Joerg Wuttke, former head of the European Chamber of Commerce, complained in the Financial Times in April. The American Chamber of Commerce in Beijing has made similar statements, while a new survey of European companies released this week by the European Union Chamber of Commerce in China showed that almost half expect even more problems with regulators during the next two years.
GE has moved production out of China.
FDI (foreign direct investment) alters fx reserves and currency levels, as does domestic inflation.
ISM
Yes, I think we have a nice L shaped economy with modest GDP growth and modestly improving employment, so far mostly evidenced by the increased hours worked that you’ve been pointing out. Acceleration happens when/if some aspect of private sector credit growth takes off.
If euro solvency risks are indeed fading, it should be back to an ok market for stocks (which could have a large one time shift upwards to reflect the reduced euro risk), and low rates from the Fed until something changes.
Like Japan, the budget deficit may be large enough to keep it all from collapsing but not enough for the kind of growth that would trigger higher rates from the Fed.
Karim writes:
Data off recent peaks but still firmly in expansion territory:
Anecdotes mixed:
- “Component lead times are increasing sharply.” (Computer & Electronic Products)
- “Market had begun to change, but it is now declining again.” (Wood Products)
- “BP oil spill will impact business conditions over the next few months.” (Fabricated Metal Products)
- “The economy continues to be sluggish, with orders 8 percent to 10 percent below last year.” (Nonmetallic Mineral Products)
- “Retail sales are strong for both the domestic and international markets.” (Food, Beverage & Tobacco Products)
| June | May | |
| Index | 56.2 | 59.7 |
| Prices paid | 57.0 | 77.5 |
| Production | 61.4 | 66.6 |
| New Orders | 58.5 | 65.7 |
| Inventories | 45.8 | 45.6 |
| Employment | 57.8 | 59.8 |
| Exports orders | 56.0 | 62.0 |
| Imports | 56.5 | 56.5 |
Q2
Q2 ended
ECB rolled it all over
Greece weathered the quarter end storm without going parabolic as in previous spikes, as ECB buying continues to provide the secondary market liquidity that enables dealers to buy the auctions.
Euro back up towards 1.24
This would be the time for equity markets to bottom and start discounting fading solvency risk
Might get a temporary pull back on tomorrow’s employment report but seems a weak economy is already fully discounted by US equities, probably also well beyond the actual weakness.
OPEC June Crude Output Down 157,000 Bbl/Day to 29.23 Mln
With the saudis setting price and letting quantity adjust looks like net demand isn’t going anywhere
Europe got by the ‘rollover event’ without drama.
German unemployment down a tad and muddling through.
Euro solvency issues (slowly) fading with ECB in control?
OPEC June Crude Output Down 157,000 Bbl/Day to 29.23 Mln
Euro Central Banks Step Up Bond Buying, Traders Say
Euro Central Banks Step Up Bond Buying, Traders Say
By Paul Dobson
June 29 (Bloomberg) — Euro-region central banks stepped up purchases of Greek, Portuguese and Irish government securities today, traders said, deepening efforts to support the region’s bond market in the wake of the sovereign-debt crisis.
The purchases focused on maturities of five years and below, with some buying interest also shown for longer-maturity Greek bonds, said the traders, who declined to be identified because the transactions are confidential. The extra yield, or spread, investors demand to hold the nations’ securities instead of benchmark German debt narrowed.
The European Central Bank took the unprecedented decision to start buying government bonds last month to help the European Union contain the Greek debt crisis. The ECB said yesterday it bought 4 billion euros ($5 billion) of bonds last week, taking the total purchases as of June 25 to 55 billion euros. Greek debt spreads had been widening, approaching their levels before the EU rescue was announced in early May, amid speculation funds that track bond indexes were selling the debt.
Central banks “are more active than they have been of late,” said Huw Worthington, a fixed-income strategist at Barclays Capital in London. “There has been a lot of volatility in a lot of the spreads, and some concerns of selling ahead of the month end.”
Greek two-year notes rose, sending the yield down 41 basis points to 10.19 percent as of 3:43 p.m. in London. The yield spread with German two-year notes fell 39 basis points to 1001 basis points. The yield on 10-year Greek bonds fell 41 basis points to 10.57 percent.
Greek securities will leave indexes managed by Citigroup Inc., Barclays Plc and the Markit iBoxx index at the end of this month after they were downgraded to junk by Moody’s Investors Service, potentially triggering sales by managers in so-called passive funds.
The Irish two-year bond yield fell 11 basis points to 2.88 percent and equivalent-maturity Portuguese yields dropped nine basis points to 3.61 percent.
ECB Purchases
ECB purchases of govt bonds for last week amounted to EUR 4 billion,
matching previous week and bringing total to EUR 55 billion:
Week Purchases Total
1 16.5 16.5
2 10.0 26.5
3 8.5 35.0
4 5.5 40.5
5 6.5 47.0
6 4.0 51.0
7 4.0 55.0
That’s a lot of greek bonds, presumably the ECB is buying enough to support rates sufficiently so they can refi themselves.
PCE/Personal Income
Very good, looks like continuing muddling through with moderate growth unemployment drifting lower in a few months when there are no more hours to add to the existing labor force.
Welcome to Japan, Mr. US bond market?
Ok market for stocks, especially with Euro zone risk fading. Just China h2 risk left, seems.
Karim writes:
PCE data today was encouraging and showed the positive impact of hours on labor income.
Personal income up 0.4% with wage and salary income up 0.5%.
Personal spending up 0.3% and headline deflator unchanged, so strong advance in real consumption spending.
For all the slowdown fears, real private sector demand will be stronger in Q2 than Q1.
Core deflator up .162%, largest advance in 7mths. Recent divergence from core CPI (PCE data has been firmer) reflective of lower weight of housing in PCE data.
Not saying inflation is picking up, just that deflation fears seem overblown.
Warning- massive euro zone equity rally alert
If I’m right about the ECB having moved to support the debt of the national governments as well as the banking system, look for a blow out equity rally as markets come to understand this new policy means the national government solvency issues are over.
A muddle through economy is sufficient to drive an equity rally for a market that’s pricing in a relatively high probability of default risk.