G3 Recap 1-14-11

Main Items:

  • U Michigan Confidence declined to 72.7 in Dec vs 75.5 expected and 74.5 previously. The current conditions index fell, but the expectations index actually improved.
  • US Retail Sales Ex Auto & Gas rose 0.4% MoM in Dec vs 0.3% expected. The Core print (ex gas, building materials, auto dealers) rose 0.2% MoM vs 0.8% previously and was the lowest print since July. The real YoY number was roughly unchanged at very healthy levels:

  • US CPI printed 1.5% YoY vs 1.3% expected and 1.1% previously, reflecting higher gasoline prices. Core CPI printed 0.8% YoY vs 0.7% expected, unchanged from last month.
  • Earnings:
  • JPM: 1.12 vs 1.00. Revenues came in at 26.1bn vs 24.2bn expected. Loss reserves release of 2bn in 4Q vs 1.7bn in 3Q and 2.4bn in 2Q.

Overseas Data:

  • The PBoC hiked the Bank Reserve Ratio by 50bps, to take effect 1/20. The RRR for large banks will now be 19%. A hike had been expected by the market.
  • EU CPI rose 2.2% YoY in Dec as expected. Core CPI printed 1.1% YoY as expected
  • UK PPI Output Core rose 2.9% YoY in Dec vs 3.0% expected and 3.3% previously

Commentary:

  • The JPM results were pretty decent. In particular, loans grew 1% QoQ, the first time since 2Q2008. The increasing improvement in revolving credit was also a plus.
    Loan growth turning positive in 4Q has been noted in a few other places, but has in general been under-reported. This is a pretty big deal. It confirms that the deleveraging headwind that has afflicted the economy has indeed been abating. It also raises risks down the road that the excess reserves out there can re-ignite speculative fervor, leverage and increase future inflation risks, although the epicenter will likely be in foreign countries with currencies that are pegged to the USD…
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