G3 Recap 8-15-11

Main Items:

  • US Empire State manufacturing declined to -7.72 in August vs 0 exp and -3.76 prev.
  • The Fed Senior Loan Officer Survey showed that banks continued to slowly ease credit standards in 3Q. ~20% indicated a net easing for large and middle market firms, while 8% reported the same for small firms.
  • ECB released data showing it purchased 22bn of debt last week.
  • According to German newspaper Welt am Sonntag, while German officials may continue to oppose the idea of Eurobonds publicly, the German government behind the scenes no longer rules out agreeing to the issuance of such bonds bonds as a measure of last resort to save the single currency.
  • Reuters reports that the SNB is considering a peg of 1.1 to the Euro.


  • Multiple EU market holidays today.
  • Japan 2Q GDP declined -0.3% in 2Q vs -0.6% exp


  • The equity market bounced back smartly from very oversold levels, as much of the EU blowup risk premium was taken out of the market today. Amidst the strong price action, the release of the Federal Senior Loan Officer Survey did not get much coverage. The benign results of the survey is a moderately strong indication that financial conditions in the US continue to become more accommodative. For a levered economy, this supports the view that a recession might yet be averted, although 2 big caveats apply. First, the data does not cover the most recent period of market volatility and second, there is a possibility that the relationship between credit availability and economic growth breaks down in a balance sheet recession.