Underlying Themes
Yet more television opportunities for those on Capitol Hill as they quiz BP CEO Hayward for a massive seven hours. This after hauling in the bankers et al as they attempt to blame everyone other than themselves on the current mess. Unfortunately it is becoming all too apparent that forefront in many minds are November’s mid-term elections. Meanwhile their suggested solution to the haemorrhaging Government Sponsored Enterprises Sallie Mae and Freddie Mac is to de-list them from the stock exchange. Guaranteeing or owning half of all US mortgages, yet lawmakers are not even discussing what to do with these as part sweeping financial reforms.
What to watch for next week
Sunday the 20th Presidential election in Poland and the runoff of Colombia’s. Monday, the summer solstice, quiet with just Japanese April All Industry Activity Index, May Convenience Store, Tokyo and Nationwide Department Store Sales and UK June Rightmove House Prices. Tuesday April EZ16 Current Account, US House Price Index, May Existing Home Sales, German June IFO and Eurozone Consumer Confidence while UK Chancellor Osborne publishes his emergency budget. Wednesday Bank of England Minutes of its June 10th MPC meeting, BBA Mortgage Approvals, June PMI’s for various European countries, German July GfK Consumer Confidence, US May New Home Sales, the Fed’s FOMC and Norges Bank’s rates decisions (expected unchanged at 0.25% and 2.00%) and Iceland’s too (a cut of 50 or 100 bp from 8.5% expected). Thursday Japan May Corporate Services Prices and Trade Balance, US Durable Goods Orders and Eurozone April Industrial Production. Friday Japan May Nationwide and Tokyo June CPI, US final Q1 GDP and June University of Michigan Confidence Survey while in Huntsville, Ontario, Canada hosts a G8 summit with G20 meeting in Toronto though to Sunday the 27th.
Positioning and Technical Analysis
Things might limp along for another week or so but the ultra-long term trend to lower Treasury yields should continue even further, taking many top-rated borrowers to new records. Sub-investment grade institutions will suffer though as spreads widen, those of suspect quality being marked down well before the rating agencies take a look. Safe-haven Japan and Switzerland should gain, creating headaches for companies and the authorities there, and Gold should remain a popular choice. Eurozone money market likely to fret as one-year ECB loans expire to be replaced by fixed-rate three-month cash.
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