Morning stuff

The July Trade Deficit totaled $32b, almost $5b more than expected and is up from an upwardly revised $27.5b in June. It’s the highest since Jan and was due to a bigger than expected rise in imports which were up 4.7% while exports were up just 2.2%. Imports were in part boosted by a 7.6% rise in crude oil reflecting the rise in price but even ex petroleum, the deficit widened by almost $4b from June. As a result of the higher than expected trade deficit, Q3 GDP estimates will be trimmed by possibly .4-.5 of a % all else being constant due to the math of a larger gain in imports than exports. The lower deficit over the past year has been a boost to GDP as imports had fallen at a greater pace than exports did.

Initial Jobless Claims totaled 550k, 10k less than expected but the prior week was revised up by 6k to 576k. It is the lowest level since mid July when we saw distortions with the summer auto plant seaonsals and outside of that, its the lowest since early Jan. Continuing Claims were 112k less than estimated and fell by 159k from last week and it sent the insured unemployment rate lower by .1% to 4.6%. Evidence though still remains that the drop in continuing claims has more to do with those not finding new jobs and exhausting their benefits because the Emergency Unemployment Compensation total rose another 73k to a new high of 3.1mm, up from 1.16mm one year ago. Those that are receiving extended benefits past the EUC fell by 19k and total 438k. Bottom line though, its clear that the pace of firings continue to moderate with the pace of hirings still in question.

The Euro is higher for a 5th straight day even though ECB officials reiterated that monetary policy will remain easy until economic growth is on a firm sustainable path and that time is not yet. We heard the same from Fed Pres Evans yesterday with respect to Fed policy. The BoE left rates unchanged as expected and made no changes on the size of their asset purchases. The Bank of Korea left rates unchanged as expected and said they will maintain their accommodative stance. At around 5ish am, Chinese Premier Wen said “China’s economic rebound is unstable, unbalanced and not yet solid” and European stocks quickly traded lower but comes after 4 straight days of gains. Wen did say that the stimulus plan will remain on track. Chinese stocks broke a 7 day winning streak but the rest of Asia traded well even though Japanese machinery orders and Australian jobs data were weaker than consensus.

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