May Goes Out Strong

May 31, 2011

Equity markets are strong this morning as the “risk on” trade picks up a bid on the last day of the month. EU leaders appear to be coming to agreement over a second rescue package for Greece in an effort to avoid a default by the troubled country. It appears that Germany has changed its tune slightly, softening on its demands that a second bailout include private sector assistance.

Global economic data continues to soften, which could be positive for equities as it helps policy makers justify keeping stimulative policies in place. Inflation in Euro-land came in less than expected, which is also helping global equities since it eases pressure on the ECB to raise rates. The Chicago Purchasing Manager’s Survey came in at 56.6 vs. expectations of 62.0 and last month’s 67.6. Consumer confidence for May came in at 62.0 vs. expectations of 60.5 and vs. April’s 65.4.

Oil has eased over the past month, and while national gasoline prices haven’t eased due to refining capacity constraints, prices at the Palo Alto station I showed last month have eased by $.24 to a mere $4.759 for regular and $4.999 for Supreme.



Moody’s is considering downgrading Japan’s sovereign debt. “The review has been prompted by heightened concern that faltering economic growth prospects and a weak policy response would make more challenging the government’s ability to fashion and achieve a credible deficit reduction target.”

Wheat prices are off 4% this morning after Russia announced it would lift its ban on wheat exports.

Japanese manufacturing grew by 1% in April vs. March, and indications are for a bigger rebound in June. Factory managers expect orders to rise by 8% in May and 7.7% in June.

The Organization for Economic Cooperation and Development is encouraging central banks to increase benchmark interest rates to contain inflation. "The rise in long-term inflationary expectations ... suggests that part of the recent rise in headline inflation may now be expected to persist for longer than previously thought," the OECD said.

U.S. Rep. Paul Ryan's proposal to privatize Medicare is almost certain to be dropped by the GOP, but that's no excuse for Democrats or Republicans to stop working to control the cost of health care for the elderly, according to The Economist. "Both parties have, somewhere inside them, a serious proposal to reform Medicare," the magazine noted. "If they thought they could be elected by offering such a plan, they would do so."

The King of the Sweater Vest, Jim Tressel, has left his second school in disgrace. Just over a decade after leaving Youngstown State because of NCAA violations, the Ohio State football coach resigned over the weekend in the midst of what appears to be at least 100 NCAA infractions.

I’ve heard rumor there is an NBA Final occurring, but can’t confirm that rumor.

Have a great day

Ned