Recap 8-20-12

Main Items:

  • Chicago Fed national Activity Index was stable at -0.13 vs -0.05 exp and -0.15 prev.
  • Caterpillar CEO in the FT: “Virtually no segment today in the US is signaling any recession. It’s also not signaling a boom. China has bottomed and I think everybody agrees – the question is whether it’ll snap back or be flat, but it won’t disintegrate. Brazil has bottomed.”
  • Citi: “Our bank treasury customers expect the Fed’s extended low rate policy to continue, maybe into 2015, have come to the end of their ability to cut funding costs much more, and worry about how they can defend their net interest margins much longer. Even with the recent back-up in rates, they are uncomfortable with extending duration in their MBS portfolios. As a result, our bank treasury customers are studying, and studying some more, the possibility of adding credit risk to their investment securities portfolios.”

Overseas:

  • Der Spiegel reported the ECB may set yield caps on sovereign bonds. Der Spiegel reports that the ECB wants to make its bond purchases more transparent and plans to start announcing the volume of its sovereign bond purchases immediately after buying them.

Upcoming Data:

  • Tues: Japan Merchandise Trade Balance
  • Wed: US Existing Home Sales, BoC Governor Carney speaks, FOMC minutes, China HSBC Flash Mfg PMI
  • Thurs: EU PMI, US Jobless Claims, US Markit Prelim PMI, New Home Sales,
  • Fri: US DGO
  • Mon: German IFO, Dallas Fed

Commentary & Links:

Note that the Technology sector in the US also looks fairly cheap at the moment. Furthermore, there will be a slew of major new releases in the next two months: iPhone 5, Windows 8, the new iPad, and Microsoft Surface to name a few. The ultimate results could certainly disappoint, but anticipatory buying could be significant. Finally, note that anecdotal reports suggest that tech inventory levels are very lean. This all suggests that the likely probability distribution for tech outperformance may be right skewed for the next couple months.

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