Daily Market Color 8/23/2012

Daily Market Color

8/23/2012

Economic Front Last Night

·         Existing Home Sales came in below estimates @ 4.47m Vs 4.50m

o   M/M rise of 2.3% & Y/Y rise of 10.4%

o   All regions showed gains except for the West

o   The report had a short lived effect on US equities yesterday

·       

      According to the FOMC Minutes released yesterday at 2:30pm, many members feel QE3 is necessary unless incoming information proved otherwise, via Bloomberg.

o   The dovish minutes pushed Treasuries higher, I went long one future contract on the 10yr treasury note and plan to close it before Jackson Hole

o   The FOMC policy decision on 9/12/12 will be conditional upon August non-farm payrolls report and GDP

o   Whether the FOMC decides to do QE3 or not, I expect volatility in treasuries on 9/12/12 and I plan to capitalize on it

·     

           Germany released flash manufacturing/services PMI data, they beat manufacturing consensus and missed services consensus, but both numbers were below 50 which signifies a contraction

·        

      Germany also released GDP data that was in line with consensus, growing 30bps  

·        

      EMU released flash manufacturing/services PMI data, they beat manufacturing consensus but missed services consensus, these numbers were also below 50  

^o     Despite the whimsical numbers, the Euro continued to climb higher against the dollar

^o     Market participants seem to be anticipating Mario Draghi’s commentary at the Jackson Hole symposium in addition to the ECB’s policy announcement on September 6^th 

^o     I will be looking to short the Euro on any surprise to the downside because the markets are rallying into expectations that I don’t expect to be met

Headlines

^·        According to the Congressional Budget Office (CBO) 2013 economic forecast released yesterday, US GDP will drop 50bps and the jobless rate will be above 9% if scheduled policy changes go through

^o     The 2012 deficit is expected to be 1.1trn, 100bn less than their forecast in March of this year

^·          Greek Prime Minister is asking the Troika for more time to implement reforms

^o     If Greece do not receive additional time that could push the Euro lower

^·          Japanese trade deficit came in larger than expected,  Actual (-517bn) Vs Estimates (-300bn)

^o     The Yen rallied nearly 100bps on the report, its coming into resistance at 1.280

^o     I am looking to short the Yen against the dollar because there is a low probability of future events within the next week to sustain the rally