China remains the swing factor

Better than expected earnings from Alcoa (partially citing China) and Chinese car sales rising 48% y/o/y in June are helping to lift commodities and in turn global stock markets. On the AA call, the CEO made an interesting comment about China according to Bloomberg, “One of the things that the Chinese government very smartly does these days is that they are stimulating people that it’s good to not have too much savings and to buy new cars and get a new air conditioner.” The BoE left rates unchanged and kept its quantitative easing program in place to buy a total of 150b pounds of gilts which will be complete next month. They will review it again at their August meeting. Some thought they would increase the amount and Gilts are down sharply in response as is the Pound. US Treasuries are following on the downside and the reaction highlights the risk with QE. With the Yen at 5 month highs, a Japanese official said excessive currency moves is undesirable. The Nikkei was lower due to the Yen spike. Initial Jobless Claims are expected to total 603k vs 614k last week. Continuing Claims are expected to rise modestly. June comps so far look weaker than expected.

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