Recap :


JPM notes that the Eurostoxx dividend yield is (orange below) now essentially on par with the European high yield bond yield to worst: (white below)

The tightness of the spread should be a strong incentive for European corporates to re-lever. (or cut dividends if it was later in the business cycle) But as we know, the EU economy is highly dependent on the bank system, which is in a predicament that is comparable to a fat man trying to diet. But the diet regimen may be nearing an end. Results of the asset quality review (AQR) are due in late October, and market expectations are that nearly all large banking groups will be able to avoid having to raise additional capital. Of course, not having to raise additional capital is not at all the same as being able to go on a credit binge, but the point I want to make here is that the backdrop for a pro EU equity environment is – finally, a year after it became popular – taking shape.

The NYFRB posted another interesting piece on the apparent relationship between political polarization and income inequality:


  • June PMIs:
  1. Japan Mfg PMI stable at 50.1 vs 51.1 exp and 49.9 prev
  2. China HSBC Mfg PMI improved to 49.7 vs 50.8 exp and 49.4 prev
  3. EU Mfg PMI declined to 51.9 vs 52.2 exp and prev. Germany was inline, but France dropped sharply to 47.8 vs 49.5 exp
  4. EU Svcs PMI declined to 52.8 vs 53.3 exp and 53.2 prev. Both the German and French measures missed expectations by ~1pt.
  5. US Markit Mfg PMI improved to 57.5 vs 56 exp and 56.4 prev

US Existing Home Sales rose 4.9% MoM vs 1.9% exp and 1.3% prev. Looks like this measure is rebounding:

Buybacks are now at a near record level; Q1 statistics from Barrons show S&P companies bought back $159B in stock, up 59% from Q1 2013 and the second highest quarterly reading ever (Q3 2007 was $172B). h/t Nam

College students who took out loans will graduate this year with an average of $33,000 in student debt, up an inflation-adjusted 32% from 2007. That, along with a jump in borrowers, has pushed overall student debt to $1.1 trillion, almost double the load in 2007. The homeownership rate among those under 35, meanwhile, has fallen to 36.2%, from a high in 2004 of 43.6%. Americans with student debt also have seen their credit scores plunge as delinquencies rise, with the average score in the low 600s. Average credit scores on home-purchase loans stand in the mid-700s. (WSJ) Note also that most student loan borrowers do NOT know what they are signing up for, per the NYFRB.

Upcoming Data:

  • Tue: German IFO, US House Prices, Consumer Confidence, New Home Sales
  • Wed: German GfK Consumer Confidence, Italy Consumer Confidence, US DGO, Core PCE,
  • Thu: France Consumer Confidence, US Jobless Claims, Personal Income
  • Fri: Germany CPI, UMichigan Confidence
  • Weekend: New ZealandBuilding Permits, Business Confidence, Japan Housing Starts,
  • Mon: Month End, EU Money Supply, CPI, UK Mortgage Approvals, Canada GDP, ChicagoPMI, US Pending Home Sales, AustraliaMfg PMI, China Mfg PMI