Archive - Jul 15, 2010

JP Morgan kicks the bank earnings season off with a disquieting thud, as we suspected.

Not even the Japanese want to buy their own stocks, with foreign institutions accounting for up to 60% of trading volume on a good day. Local investors would much rather buy emerging market funds, currency funds, bond funds, anything but their own equities. This explains the miserable 1.15% yield investors get on ten year JGB’s. A new kid has shown up in the neighborhood called China which has usurped its traditional role. A massive accumulation of debt and a thousand “bridges to nowhere.” Obama take note.

After a 0.5% decline overnight, the BDIY is now at exactly 1,700, marking the longest sequential decline since the launch of Windows 95. Little to add here. We anticipate that Tim Geithner will soon suggest stress tests to be conducted on dry bulk shipping vessels to the 5 or so Greek CEOs running the industry, with bailouts to come for those leaked to be in need for financing.

The just completed auction of Spanish 2025 Obligacions for just under €3 billion, came at a 5.116% yield, a substantially worse level than the last auction as of April 22, which was placed at 4.434%. The only redeeming feature was that the bid to cover increased from the prior 1.79 to 2.575, after €7.722 billion worth of bids noted an interest. Somehow we get the feeling the ECB has been busy this time around, as have been the Chinese, which were instrumental in last week's 10 Year auction. According to Market News, "Spain is "very confident" it will meet its forthcoming July redemption payments, given its cash position at the Bank of Spain." Furthermore, tax receipts are running in line with expectations, adding to the positive feeling. This is all wonderful, and occurs on the back of a just released Barclays report which (to be posted shortly), which notes that Spanish Cajas alone will likely require €36.2 billion euros to plug a capital shortfall. Luckily the ECB and China are more than happy to keep providing the funds necessary to plug this hole, which upon third, fourth and fifth reestimations will likely end up being one zero short of the true capital deficiency.

• Asia stocks, commodities decline as China growth slows, Fed cuts outlook.
• Back-to-school spending may rise as much as 16% in US - Natl Retail Federation.
• BOJ says Japan's growth will slow next year, keeps benchmark rate at 0.1%.
• China’s stocks dropped, after GDP growth eases to 11.1% in first half from year earlier.
• China’s June crude-oil processing rose at the most gradual pace in eight months.
• FDIC accuses 4 former executives of failed IndyMac of negligence in making loans.
• IMF sees Irish deflation through 2011; predicts a 1.8% fall in prices in 2010, a 0.5% fall next.

RANsquawk European Morning Briefing - Stocks, Bonds, FX -- 15/07/10

It's official. Illinois, the fifth most populous state in the U.S., has overtaken Iceland in the default risk category. Will other U.S. states follow?

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 15/07/10

[1] The S&P 500 meets key trendline resistance on day 55 of a Fibonacci time cycle as exponential moving averages cluster ... [2] daily, weekly and monthly support / resistance levels for the US Dollar ... [3] Crude Oil futures trace out a tricky wedge formation

Tsy/equity diverging... bank earnings on deck... and a suspect rally meeting formidable 50 & 200DMA resistance. Time to turn the old risk off.

Why isn't our economy recovering? I ask that question often and have written about it many times. Perhaps a better question is: what needs to happen in order to make our economy grow? I offer some solutions.