Archive - Aug 26, 2010

• Asian shares trade mostly higher, though action proves choppy.
• New-home sales slid to a record low and a slower-than-f'cast rise in durable-goods orders cast doubt on the US recovery.
• Official China data masks surge in housing, food prices.
• Roubini: Q3 growth in US to be 'well below' 1%.
• SEC votes to boost power over boards.
• Treasury sells 5-year notes at lowest yield ever.
• Agricultural Bank of China temporarily stops lending to property developers.
• Ahold reports 3% rise in Q2 profits.

Goldman's Ed McKelvey is trying to salvage his team's reputation as the biggest gloom and doomer on Wall Street by explaining why facts and not noise will be responsible for a revised drop of Q2 GDP by not 50%... but 45% of something. What is more interesting are the reasons for the contraction: i) A significantly reduced pace of inventory accumulation; ii) An even wider trade deficit than was first estimated; and iii) A small shift in the composition of final sales to domestic purchasers. Yet those expecting this note to be a start of an optimistic shift, prepare to be disappointed. As McKevley says, "such a conclusion would be premature given the information currently available on the economy’s transition into the third quarter," and in looking at Q3 GDP, the firm gets even gloomier than ever: i) Growth in real consumer spending appears to have softened from an already sluggish pace; ii) Real residential investment has resumed falling at a double-digit pace, iii) Real business investment is roughly on track for our 10% annualized growth assumption, but with risks now tilting to the low side, iv) The trade deficit ended the second quarter in a deep hole, and the conclusion is :"Thus, the key components of private final demand suggest that our 1.7% estimate for annualized growth in real final sales this quarter is more likely to be too high than too low." A lot of words for not saying we are in a double dip.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 26/08/10