G3 Recap 1-21-11

Main Items:

  • A Times article discussed how Washington is laying the logistical groundwork to allow state government to declare bankruptcy.
  • The prices of US bonds backed by loans for office blocks, shopping centers and hotels are soaring, signaling growing optimism among investors that the country’s commercial real estate sector is on the road to recovery.-FT
  • Earnings: (misses in bold)
  • BAC: 4c vs 14c, but there were a lot of items. .
  • GE: 36c vs 32c. Revenues 41.4bn vs 39.9bn. GE Capital earned 1.1bn on 11.9bn of revenue.

Overseas Data:

  • China inflation may top 6% at time in the first half of ’11 according to a report in the China Securities Journal (which could be much higher than forecast); the same article speculates that the next rate hike could come around the same time as the country’s New Year holiday.
  • German IFO Business Climate Index improved to 110.3 in Jan vs 109.9 expected and previously.
  • WSI Institute said that German Effective gross wages rose 2.2% YoY, or 1.1% in real terms, the first YoY increase in 6 years.
  • UK Retail Sales ex Auto Fuel rose 1.0% YoY in Dec vs 1.3% expected and 1.8% previously. There was likely an impact from bad weather.


  • Bond market has been under pressure the past couple days, as the good jobless claims print and strong consumer spending data has some market participants expecting some sort of language change at the 1/26 FOMC meeting. Based on the comments of new FOMC voters, however, at most 1 and more likely 0 dissents are likely. Furthermore, though jobless claims have trended lower, the JOLTS data suggest that new job openings have remained muted, and leading indicators like temporary payrolls suggest that the pace of payrolls improvement may slow.

    As the FOMC does not believe there has been much of an increase in NAIRU, This suggests that the typical relationship between the decline in initial jobless claims and the decline in unemployment may not happen or happen with a much longer lag. (chart below) In any case, a big change in language still seems like a lottery ticket view.