News of day

The market news of relevance today is out of Europe. After Junker’s comments yesterday questioning whether Greece will meet the conditions of the IMF to get the next tranche of their bailout, ECB member Wellink said today they Greece will meet these conditions. May Euro zone economic confidence fell slightly but to a 7 month low. May German inflation did slow slightly from April as oil prices led the way. While European banks are leading stock markets there higher after some upgrades, the iTraxx financial CDS index did rise to a 2 month high. The Irish 10 yr yield is rising to a new high as we know the markets will turn quickly to Ireland if there is any change in the terms of existing Greek debt in the next week. UK Consumer confidence in May jumped 10 pts unexpectedly to the best of the year. Without a Royal wedding in June we’ll see if that holds. While most Asian markets traded higher, the Shanghai index continued to lag, falling for a 7th straight day to a fresh 4 month low but copper prices are rising to their best level in 3 1/2 weeks. A big question for industrial metals outside of China over the next yr is at what point Japan starts to rebuild after the current clean up.

Both income and spending in April rose .4% and March was revised down by .1% for each to .4% and .5% gains. The pace of gains sounds good but unfortunately inflation had a big influence. The PCE price deflator rose .3% after a .4% rise in March. Thus the REAL gains in income and spending were just .1% and in March income was flat on a real basis with just a .1% gain in spending. The Savings Rate was unchanged at 4.9%. Bottom line, this data point is always grade b in terms of market impact but is worth looking at to gauge the influence of late that rising prices are having on our standard of living.

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