May 18, 2011
Equity markets are set to open flat this morning as earnings season winds down and the macro news flow slows to a trickle. The big upcoming event (or non-event) is the end of QE2, scheduled to end June 30. The US hit their debt-ceiling limit earlier in the week, although by using some accounting gimmicks the Treasury can continue to operate for 2-3 more months. Polls still show that 90% of Americans are against raising the debt ceiling.
Wheat is up this morning on concerns that a drought in Europe threatens crops there. Oil prices are also up this morning as over 100 wildfires in Alberta, Canada are threatening to shutter almost 100K barrels of production per day.
According to the Washington Post, manufacturing jobs are returning to the US as a result of the weaker dollar. Unfortunately, the pay at most jobs is lower than that found in the prior cycle. Would this be considered a Pyrrhic victory?
Commodities Now is reporting that China’s imports of major commodities has begun to wane, which could add continued pressure to already weak commodity markets. The chart below shows the CRB over the past year.
Federal Reserve Bank of St. Louis President James Bullard said that the end of QE2 represents the “high tide of easy monetary policy.” He expects the Fed to begin reducing the size of its balance sheet, effectively tightening money supply, before the end of the year. Bullard was the first Fed member to support QE2, and is generally regarded as an inflation dove.
Oaktree Capital announced plans to list on the NYSE, becoming the latest in a long line of money management, investment banking and private equity firms to tap the public markets for capital. In general the investments have proven to benefit the sellers much more than the buyers.
Target beat estimates last night on better than expected private label credit card activity as well as strong grocery sales. Dell also beat on better input costs, in contrast to the results of Hewlett Packard a day ago. Both cited weak consumer demand.
New York Attorney General Eric Schneiderman opened what appears to be a broad investigation into major banks' role in the financial crisis. In recent weeks, he has made formal requests to Bank of America, Goldman Sachs Group and Morgan Stanley seeking documents and information relating to loan pooling and home-mortgage securitization.
State legislatures and governors are moving to reduce the length of time that jobless residents can receive benefits. Right now more than 8 million people in the U.S. collect unemployment benefits. State officials are worried they may be forced to raise taxes on employers to continue paying benefits.
The saga of the Governator continues as revelations about his love child with the family’s long time housekeeper begin to emerge.
EMEA markets are up across the board this afternoon, Asian markets were generally positive last night on strength from bank and tech stocks.
Have a great day