July Durable Goods orders were not pretty. They rose just .3% m/o/m headline vs an expected gain of 3% and ex transports fell 3.8% vs a forecasted rise of .5%. Non defense capital goods ex aircraft fell 8% after a gain in 4 out of the previous 5 months, led by a 15% drop in machinery orders, a 5.9% drop in electrical equipment and 2.4% fall in computers/electronics. Orders for vehicles/parts rose by 5.3% and are up for a 5th straight month. Shipments, which get plugged into GDP, rose 2.2% and with inventories up by .6%, the inventory to shipments ratio fell to 1.55 from 1.58. Net-net, with the US consumer still on the ropes and Gov’t stimulus coming to its end, cap ex and exports are the 2 remaining key pillars of health and the data shakes the cap ex one in a discouraging way. Yes the data is volatile but the inventory story has run its course and end demand must pick up soon in order to further spur cap spending.
S&P’s one notch credit downgrade to AA- for Ireland is upsetting markets but to compare to the other rating agencies, Fitch downgraded Ireland to AA- in Nov ’09 while Moody’s has it one notch higher. S&P is most worried about the rising cost of their bank bailouts. Irish yields are higher and 5 yr CDS are up by 7 bps to 317 bps. Ireland comes to market tomorrow with debt for sale. In sympathy Greek 2 yr yields are up by almost 30 bps to 11.3% and CDS is up by 34 bps to 932 bps and in response German 10 yr bunds and UK gilts are at fresh record lows and US yields lower too. Being shrugged off was the German IFO business confidence # which rose to the highest since June ’07. With new lows in mortgage rates, the MBA said refi’s rose 5.7% to the most since May ’09. Purchases rose a punk .6%. ABC confidence rose 1 pt to -44, a 6 week high. Only 3 mo’s after riots, the Bank of Thailand raised rates by 25bps for a 2nd month to 1.75%.