Recap 2014-07-14




  • GS on Citi: We peg core EPS of $1.43, above our like estimate of $1.30. The quarter was strong vs expectations across the board, marked by strength in investment banking and Fixed Income relative to guidance, profitability in Citi Holdings, $1.1bn of DTA utilization and lower credit costs. In conjunction with earnings, Citi also announced a $7bn settlement with the DOJ, which while disappointing from a P&L perspective (minimal preexisting reserves), should put a major legal overhang behind it… FICC markets came in better than expected ($3.0bn vs $2.6bn est), resulting in market revenues down 15% YoY vs. guidance for trading down 20-25%.
  • RBA Paper: Recent data do not show signs of a bubble.
  • Glenn Stevens interview in The Australian, via GS
  1. It is too early to contemplate rate rises.
  2. The range of uncertainty to economic outcomes in Australia is high.
  3. Economic growth is still expected to return to a sub-trend pace.
  4. High frequency movements in consumer confidence don’t hold a lot of information content…unless they move a lot.
  5. The A$ remains overvalued and as long as the A$ responded to the fall in the terms of trade then Australia’s chances of managing through the coming fall in mining investment would be enhanced. In any case, the prospect of the Fed raising interest rates may prompt a significant rise in volatility that may bring the A$ lower.
  6. The RBA’s focus is on whether there is excess credit creation rather than house prices and to date that evidence is that there is not.

Iran – both the P5+1 group of countries and Tehran warned of large gaps that still exist between the two sides over Iran’s nuclear program. The Jul 20 is fast approaching and many people assume it will be extended by 6 months. USA Today.

Merkel does not want to complete her full term as German chancellor and is planning to resign before elections due in 2017 – London Telegraph/Der Spiegel.

Goldman’s strategist increased the year-end 2014 S&P500 target to 2050 (from 1900) and 12-month target to 2075, reflecting upside of 4% and 6%, respectively. The reason is their lower 10yr yield forecast (GS recently reduced 2014 target by 25bp to 3.0%). More specifically, if the yield gap between forward earnings and bonds converge to the long term average, then this implies higher S&P.


  • Mon: RBA Minutes
  • Tue: BoJ, UK CPI, German Zew, US Retail Sales, Empire Mfg, Import Prices, CA Existing Home Sales, China Retail Sales
  • Wed: UK Employment, US PPI, BoC, US NAHB,
  • Thu: US Jobless Claims, Housing Starts, Philly Fed,
  • Fri: Canada CPI, UMichigan Confidence
  • Mon: NZ Credit Card Spending