Friday, July 2, 2010

Economics Events; US Factory Orders (miss the street) RBI finally increased the repo .25bps

The normal model of asset price movements does...


Economics Events

· US Jobs – the total non-farm loss of 125K was a bit better than expected (the St was modeling a loss of 130K), but the private add of 83K was below plan (the St looking for 110K additions) while there was a revision to May (from +41K private adds to +33K).  Wages and hours both fell short. 

· US Factory Orders – came in dwn 1.4% (vs. the St looking for a 0.5% decline). 

· India - As we have been calling for a long time, the RBI finally increased the repo and reserve repo rates by 25bps each. The repo rate was increased from 5.25% to 5.50%, while the reverse repo rate was increased from 3.75% to 4.0%.  This is a long overdue. Demand in the economy has been surging for a while. 1Q10 GDP growth was at a two-year high. IP growth has been in double-digits for seven consecutive months with April IP growth approaching a twenty-year high. In contrast, private investment has been sluggish for the last 12-18 months. The confluence of surging demand and stagnant supply has put increasing pressure on capacity and stoked inflation. 


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