Recap 1-19-12

Main Items:

  • US Jobless Claims dropped to 352k last week vs 384k exp and 299k prev
  • US CPI declined to 3.0% in Dec as exp vs 3.4% prev. The Core measure was stable at 2.2% as exp.
  • Philly Fed was unchanged at 10.3 in Jan vs 7.3 exp
  • JPM: The core plain vanilla US banking numbers are pretty strong pretty much on all major metrics (loan growth, credit, and margins). Capital markets was sluggish but expectations were low here to begin with. In addition to financials, a bunch of semis and semi-related companies have reported numbers in the past couple days and here results are coming in well ahead of forecast
  • Bank of America earned 15c per share versus 13c expected. Tier 1 capital went from 8.6% to 9.8%. Revenue $25.15bn versus $25.50bn expected.
  • Morgan Stanley lost 14c per share versus 57c expected. Total net revenue $5.71bn versus $5.50bn estimate. Global wealth management rev. $3.25bn vs $3.26bn q/q. Equity sales/trading rev. $1.3bn vs $2.0bn.


  • UK Consumer Confidence declined to 38 in Dec as exp vs 40 prev
  • The PBOC took actions to help inject liquidity into money markets ahead of the NY holiday. Media reports pointing to relaxed capital rules for banks helped sentiment too. Investors continue to anticipate a bank RRR reduction.
  • AU Employment declined -29.3k in Dec vs +10k exp and -6.3k prev. The UE rate declined to 5.2% vs 5.3% exp as the participation rate dropped to 65.2% from 65.5%.
  • Brazil cuts interest rates 50bp to 10.5% as exp. Consensus expectations are for the policy rates to find a floor at 9.5% by end of Q2.


The US housing starts figures today were decent. The chart below from Barclay’s highlights the improvement in multi-family starts.

The better US data, (note that NDX hit the highest level since 2001 today!) in conjunction with a stable/declining EU sovereign spreads suggests that the multi month decline in US real yields may be at risk. And with 10y real yields at -15bps, it’s not as if there is a strong value proposition.

While we’re probably not going to see real yields with a 1 handle anytime soon, a 50bp swing to +30bps or so does not appear particularly out of the question. Such a swing is likely to present additional headwinds for Gold.