Recap 1-20-12

Main Items:

  • US Existing Home sales improved to 4.61m in Dec vs 4.65m exp and 4.42 prev. Seasonal effects likes played a role.
  • US ECRI Weekly LEI growth rate hit the highest level since mid Sept last week
  • Canadian Core CPI declined to 1.9% in Dec vs 2.2% exp and 2.1% prev. A drop in seasonally adjusted vehicle prices had a large effect. The Headline measure declined to 2.3% vs 2.7% exp and 2.9% prev
  • Bloomberg reports an initial agreement on the Greek restructuring with a new 30 year maturity with coupons beginning at 3.1% and going as high as 4.75%


  • UK Retail Sales ex Auto Fuel improved to 1.7% YoY in Dec as exp vs 0.5% prev.


Canadian rates are too rich. There are almost no hikes priced in over the next 1.5 years even though 1) core inflation is at target (though falling), 2) the BoC estimates that the economy will be at full capacity by 3Q2013, at which point the appropriate policy rate should be at least 100bps higher, 3) the BoC notes that current rates represent ‘considerable monetary policy stimulus’ and the ‘economy appears to be operating with less slack than previously assumed.’
Also note that 10y Treasury yields have quietly broken above a multi-month triangle today. Whether it’s a late-October style head fake remains to be seen.

GS on US Regional banks:
With a handful of our regional coverage having reported earnings thus far, we note one major observation – there has been little to justify a further rally in the stocks. Most banks have missed or had in-line quarters and almost all of the regionals we watch have performed poorly post reporting results. Interestingly, the “set-up” has been important as the banks that had the highest run-up from October lows generally reacted most negatively to earnings, and visa-versa for those with less of a rally into earnings