G3 Recap 6-23-11

Main Items:

  • US Initial Jobless Claims increased to 429k last week vs 415k exp and 414k prev.
  • Chicago Fed National Activity Index improved to -0.37 vs -0.05 exp and -0.45 prev.
  • There were reports that the new Greece Fin Min tried to renegotiate the austerity measures. FT reports that some EU diplomats are concerned that Greece will try implement a different set of measures than the one negotiated.
  • Trichet said that financial stability risk signals in the Euro area are flashing red
  • International Energy Agency has announced this morning that will make 60 mbd of oil available to the market. This is the same volume released following Hurricanes Rita and Katrina in 2005. The volumes will take roughly two to six weeks to physically hit the market

Overseas:

  • EU PMI Composite dropped to 53.6 in June vs 55.2 exp and 55.8 prev. Both services and manufacturing prints were weaker, although German Services PMI surprised on the upside.
  • China HSBC Manufacturing PMI declined to 50.1 in June vs 51.6 prev

Commentary:

  • S&P technicals look decent. It bounced off 200dma for the 2nd time today and bounced sharply off the lows, printing a bullish Hammer candlestick:

    Furthermore, valuations are at the cheapest levels since last summer. Although the forward earnings yield of ~8.2% can certainly fall if estimates come down, one could argue that they are cheap enough to sustain a bounce:

    Ultimately, a sustainable rally will need to coincide with better macro data. But one could argue that relative to expectations, stocks don’t look too bad.

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