Daily Market Color 05/08/2015

Daily Market Color
05/08/2015

Economic Reports & Headlines
General elections in the UK showed that the Conservatives was able to get a slight majority in parliament. Prime Minister Cameron will be back to serve a second term.

German Industrial Production for March contracted unexpectedly on a month over month and year over basis. MoM: -50bps vs. exp. +40bps. YoY: -10bps. vs. exp. +40bps.

Germany’s trade surplus in March came in slightly below consensus 19.3bn vs. exp. 20.0nb. Imports increased 2.4% on a month over month basis. Exports increased 1.2% on a year over year basis.

Heading over to the UK, Halifax issued their monthly read on home prices in the UK for April. Prices increased 160bps vs. exp. 30bps. On a year over year basis prices increased 8.5% vs. exp. 7.8%.

The trade deficit in the UK came in slightly higher than expected for March: -10.1bn vs. exp. -9.5bn. Imports declined 1.0% on a month over month basis. Exports increased 1.4% on a month over month basis.

On the opposite side of the Atlantic, US Non-Farm payrolls for April came right above consensus: 223k vs. exp. 220k. The unemployment rate dropped to 5.4% from 5.5%.

Consumer prices in China came in at 1.5% on a year over year basis; consensus was 1.7%

Trades
Greece and its creditors are expected to make their 744m euro payment to the IMF this Tuesday. However, Greece is unlikely to reach an agreement with the Troika by Monday, which was previously anticipated. Monday’s deadline was important so an accord could have been submitted to the Eurogroup at their meeting this Monday. Not reaching an agreement by Monday might encourage the ECB to raise the haircut on collateral posted by Greek banks for Emergency Liquidity Assistance. I am on the sideline with trading the Greek Bailout.



On the hand, I am not on the sidelines with the UK. I bought cable after it was clear that the Conservative party was going to be the majority in parliament. The pound rallied in light of this news. I expect Sterling to continue upwards due to the sheer magnitude of the move and the unexpected outcome of the elections. The EU referendum is expected to occur in 2017.