One Minute Macro Update

US:  Today's slew of economic data will likely be viewed through the growth-tinted glasses that were illustrated yesterday.  The upsized GDP, which was a disappointment relative to expectations, was still an upsize and the market chose to take that along with Plosser's commentary as a bullish/hawkish reflection of reality.  We remain suspect, but do give growth its due.  Despite the uptick in economic sentiment, we will wait for confirmation on sustainability before abandoning our short end yield curve views.  Slowing a stimulative policy is still a far cry from reversing accommodative rates.

Europe:  A reported Greek plan contains coupon caps and maturity extensions, but not haircuts.  Still good enough to trigger CDS unless the plan were to be voluntarily agreed to.  The plan appears to be another band-aid type measure that still does not provide the needed relief.  Potential problems brewing in Italy with the departure of Berlusconi's environmental minister, painting the picture for issues at the next confidence vote.  CDS continues to march wider in the SOVXWE and the periphery single names.  A large jump in EURIBOR-OIS yesterday has us scratching our heads as it is not yet clear whether funding alone is at the heart of the matter or whether interbank spreads are being priced wider.

Asia:  Further scrutiny on Chinese real estate developments has begun to reprice assets.  US growth is still bullish for the region, but the engineering of a soft landing will require effort in 2011.

via Brian Yelvington of Knight Capital


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