Recap 5-22-12

Main Items:

· Richmond Fed Mfg Index declined to 4 in May vs 11 exp and 14 prev

· US Existing Home Sales improved to 4.62mm in Apr vs 4.61 exp and 4.48 prev.

· Japan’s credit rating was downgraded to A+ by Fitch. "The downgrades and Negative Outlooks reflect growing risks for Japan’s sovereign credit profile as a result of high and rising public debt ratios… the country’s fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk."

· GS: Italian banks have seen their deposits grow €29 bn YTD. Spanish banks have seen their deposits fall €13 bn YTD (1%), after falling €23 bn (2%) in 2011. Loan shrinkage outpaced deposit growth in both instances, allowing net liquidity creation. Portuguese and Irish banks saw -2% and flat deposit growth YTD


  • EU Consumer Confidence improved to -19.3 in May vs -20.5 exp and -19.9 prev
  • UK CPI declined to 3.0% YoY in Apr vs 3.1% exp and 3.5% prev. The Core measure declined to 2.1% vs 2.0% exp and 2.5% prev.

Upcoming Data:

  • Wed: BoJ, EU HoG Meeting, Canada Retail Sales, Home Price Idx, US New Home Sales, China HSBC Flash Mfg PMI
  • Thurs: EU PMI, German IFO, UKGDP, US DGO, Jobless Claims, Japan PMI
  • Fri: Italy Hourly Wages, UMichigan Confidence
  • Mon: US Memorial Day, Italy Business Confidence, South Korea Business Survey,


Ray Dalio recently opined in an interview in Barron’s that Europe now is like American under the Articles of Confederation. The lessons from the revision and replacement of the Articles may be worth revisiting. One major difference, however, may be the consensus view on a stronger central government. Historical accounts suggest widespread views for a stronger central government by the mid 1780’s, but it is not apparent that there is a similar consensus in Europe.