Consumer Confidence

• Frenemies: Two Greek Rivals Hold Nation's Fate in Balance (WSJ)
• Obama Attacks Republicans over Debt Talks (FT)
• Swift U.S. Action on Debt Needed in Global Interest: IMF (Reuters)
• FHA May Be Next in Line for Bailout: Delisle and Papagianis (Bloomberg)
• And the requisite NYT editorial piece: The Republican Wreckage (NYT)
• Bank Lobbyists Push European Members to Support Greek Debt Rollover Plan (Bloomberg)
• A Global Economy Held Hostage by Lehman (RCM)
• Banks 'Safe from Debt Defaults' But the Days of Double-Digit Growth May Be Over (Australian)
• Is Obama Wall Street’s Best Friend or Mortal Foe? (Bloomberg)

Market participants remained reluctant to invest in USD-based assets as the US lawmakers failed to reach a deal on raising the US debt ceiling, ahead of an August 2nd deadline, which resulted in the USD-Index to trade lower. European equities opened higher, led by financials, however as the session progressed prices moved back in negative territory, weighed upon by lacklustre European corporate earnings from the likes of BP (-2.36%), UBS (-2.37%), and Deutsche Bank (-0.68%). However, the FTSE 100 Index received support after GlaxoSmithKline said that its operating margin will begin to improve in 2012. Elsewhere, GBP received strength across the board following the release of second quarter advanced GDP data from the UK, which came in-line with expectations; however UK's ONS said that the quarterly GDP would have been 0.7% without taking into account special factors. Also, JPY weakness was observed following comments from sources that Japan's policy-makers are considering solo FX intervention as an increasingly viable near term option.

After yesterday's economic data drought, today brings the flood as we get new home sales and Case-Shiller prices, consumer confidence and the Richmond Fed index. We also get a small POMO as part of QE Lite and also two bill and one note auctions, sucking a combined $73 billion in capital out of the market.

• Spain Will Require Regions to Curb Deficits, Its Finance Minister Says (WSJ)
• Obama cancels fundraising appearances amid stalled debt talks (CNN)
• Toying With Default: The President isn't serious about real spending cuts (WSJ Editorial)
• QE2 is coming to the UK: Cable Appeals for New Dose of Easing (FT)
• Lawmakers Still Divided as Debt Deadline Looms (Reuters)
• Rail Stocks Tumble in China, Hong Kong (Bloomberg)
• Clinton Assures China on U.S. Debt-Ceiling (Bloomberg)
• Messing With Medicare (Paul Krugman)

Goldman performs the now traditional compilation of key global events and catalysts in the week ahead although there is really just one day that everyone is focusing on: Thursday: "House takes up Senate package, and potentially alters it. Under its rules, the House normally requires a bill to be publicly available for three days before voting on it, but might be able to bend the rules given the deadline. If support is lacking for the McConnell-Reid plan, as appears possible, the House may vote on an alternative package that pairs $300-$500bn in spending cuts with a debt limit increase of the same size. If it becomes clear during the Senate debate early next week that the Senate approach will not gain adequate Republican support in the House, House Republican leaders might move preemptively to pass a shorter extension rather than waiting to receive the Senate bill." Today the market did not crash, which foiled Obama's shock and awe plans (thank you Bernanke Put). However, if there is nothing by Thursday, then even the meanreversionbots will be powerless to just sit back and observe the massive carnage.

Relevant News by www.thetrader.se

• Proposals Emerge to Curb Greek Debt Load (WSJ)
• IMF Warns Euro-Zone Crisis Risks Global Spillover (WSJ)
• Senators craft potential escape from default (FT)
• In response to Geithner's Op-ed: Little to celebrate on Dodd-Frank’s birthday (FT)
• IEA not decided on second oil release – Tanaka (Reuters)
• Papandreou Sees Make-or-Break Time in Crisis on Eve of Summit (Bloomberg)
• Alan Beattie: Let Europe pay for its policy failures (FT)
• Berlin and Moscow leaders foster trade ties (FT)
• China's moderating growth to aid inflation fight (Reuters)
• Give Greece What It Deserves: Communism (Forbes)
• IMF Signals BOJ Could Buy More Assets as Price Outlooks Diverge (Bloomberg)
• Joke Is on China as U.S.’s AAA Becomes Laughable (Bloomberg)

All Relevant News by www.thetrader.se

All you need to know by www.thetrader.se

Next week is light on data, thus developments in the European and US fiscal tensions are likely to remain high on the agenda. The Eurogroup heads of state will meet on Thursday to discuss European financial stability and further aid for Greece. Expectations are for an increase in the Greek financial rescue package, alongside some form of voluntary ‘bail in’ for holders of Greek debt. More comprehensive solutions to stem contagion risk, such as secondary market purchases of EMU government bonds by the EFSF, are said to be also on the cards, but uncertainty is very large. Ahead of the statement resulting from the summit, the market may remain caught in the headlights of headline risk. Discussions over raising the debt ceiling in the US will continue. On the data front, the business surveys will be key to watch. Towards the end of the week the HSBC flash PMI for China, the Euroland flash PMIs and the Philadelphia Fed Survey will all be published. The Euroland surveys are expected to decline slightly, but the Philadelphia Fed survey is expected to rise although our forecast is for a notably smaller rise than that of the consensus.

The one stop summary of all the key positive and negative news in the week that was.

Today's bad economic data trifecta is complete, with the UMichigan consumer confidence number plummeting to 63.8 from 71.5, and well below consensus of 72.2. The number is far below the lowest Wall Street prediction of 68 (upper end of range was 75) and the worst since March 2009. The good thing for the Fed's QE3 plans is that high future inflation expectations are getting unanchored, with 1 year expectations down from 3.8% to 3.4%, and 5 Year down to 2.8% from 3.0%. A little lower and it will be just right.

Several important economic updates due today, among which CPI, Empire Index, Industrial Production and UMichigan consumer confidence. There is a small QE Lite Pomo today closing at 11 am. The Stress Tests are released at noon. Expect more European headlines to whip the EURUSD, and thus ES, around.

The Treasury had to sell $66Bn worth of notes this week and there was no POMO for the Fed to bid with. The US could have been really screwed but, luckily, the market crashed and everyone panicked - INTO TREASURIES! Isn't that convenient?

Now that the market's bipolar yet brief attention span has once again shifted back to Europe, the vacuum tubes have completely forgotten that last week just confirmed that the labor part of the US economy (one part of the Fed's original dual mandate, before the whole market manipulation thing became dominant) has joined housing into sliding back into near outright contraction (and the just released news that Cisco will fire 10,000 people - more on that later - will only make things much, much worse). And so the US, which up until two weeks ago was supposed to be the source of "reverse decoupling" has been quietly swept under the carpet. Yet Goldman's economics team, which in addition to being wrong about NFP forecasts, is unable to conveniently avoid discussing the US economy, has just released its latest macro report, titled, appropriately enough: "Still Disappointing." Needless to say, Hatzius still refuses to acknowledge that his December 1 "economic renaissance" call was abysmal, and so continues to push for a 3% growth in H2, but is finally getting closer to admitting defeat: "The bottom line is that acceleration to a slightly above-trend growth pace in coming months, coupled with unchanged monetary policy through 2012, remains our modal forecast, but the risks to this view are very much tilted to the softer side. In order to hold on to the modal forecast, we will need to see a clear improvement in the indicators as well as a resolution to the debt ceiling debate that imposes fiscal restraint of not much more than the 1% of GDP that we are currently building in for next year. We should have more clarity on both of these issues by early/mid-August." Good luck Jan.