Tuesday, July 27, 2010

Today’s Top Stories India hiked rates more than expected!!!!! better than expected w/German August Consumer Confidence

·         Europe and SP Futures trade higher on back of a couple positive datapoints and follow through from Monday’s strong US trading  while Asian indices were mixed (Japan and China ended lower while India, HK and Australia made gains).
·         Helping trading in Europe was a very strong Spanish debt auction (demand was near the high-end of the range and yields were lower than the June auction), an agreement on Basel capital rules which are being viewed positively for financials as they soften banking capital rules (this hit during US trading yesterday but after the European close), earnings beats and better than expected eco data.
·         Financials driving Europe - Interesting to note that strength is Europe is being carried almost exclusively by a strong Financials tape (+3% on back of Basel, better earnings from UBS & DB and strong Spain auction) while the rest of the market is flattish to dn 1.5%.
·         On the eco front, results continue to come in better than expected w/German August Consumer Confidence stronger, Eurozone lending continues to grow and Switzerland’s consumption indicator rose again in June
·         India hiked rates more than expected, which not only continues the recent trend of emerging market rate hikes, but is being take as a positive as strikes/protests over rising prices brought the country to a halt this month.
·         In China, officials downplayed worries over local vehicle loans, saying risks can be contained through measures to secure repayment.
·         China – PBOC issues a statement after Shanghai closes for Tues trading (hit @ 6amET) – says will maintain macroeconomic policy continuity; says growth likely to slow, stabilize; says risks of a double dip for the Chinese economy are low; says pressures for inflation to rise have eased (but says must remain cautious about upward price pressures and that inflation expectations remain high).  Says the Eurozone crisis unlikely to have a large impact on China GDP.  DJ
·         States expect tax collections to increase going forward - Most state governments project that the 2010 fiscal year was the trough in tax collections and expect tax revenues to rise in 2011; most states still face large deficits though; also – the coming expiration of federal stimulus funds could mean trouble for state budgets (WSJ) 
·         Banks are flush w/so much liquidity that some are starting to turn away deposits; the worry is that excess liquidity could be a drag on earnings in the coming qtrs – American Banker

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