All the news…

After 8 weeks in the past 9 of above expected Initial Jobless Claims, they were 6k less than expected at 414k for the week ended Saturday, down from 430k (revised up by 3k) last week. It is though the 10th straight week above 400k. The 4 week average was unchanged at 425k. Continuing Claims fell by 21k but was 5k higher than forecasted. Extended Benefits fell a net 115k to the lowest since July and while the pace of new hires still remain lackluster, we hope that the drop in this category is more to people finding new jobs rather than exhausting benefits. It’s likely a combination of both. In terms of Initial Claims, the unfortunate trend continues of a still stubborn pace of firings that is only modestly being offset by hirings.

May Housing Starts were 15k higher than expected at 560k annualized and April was revised up by 18k to 541k. The 560k level is right in line with the 12 month average and still not to far from the lowest since at least 1959 so we continue to bounce along the bottom. Both single family and multi family categories rose. Permits, the precursor to Starts, totaled 612k, 55k higher than estimated and the highest since Dec, but was mostly led by multi family construction where they rose to the most since Nov ’08 as the country continues to transition to a lower homeownership rate. As of Q1, the homeownership rate was at 66.4%, below the record high of 69.2% in Q2 ’04 but still above the long term average of 65.4%. In terms of overall construction jobs, multi family will be one bright area. For single family homes, I continue to argue the less starts the better right now as we work thru the still high inventory of existing homes.

“I am confident that next Sunday, the Eurogroup will be able to decide on the disbursement of the 5th tranche of the loans for Greece in early July,” said Olli Rehn, the EU economic commissioner at around 6am this morning. The Greek 2 yr yield, above 30% right before, is back towards 29%. If it wasn’t for the ECB and their line in the sand position against any sort of debt workout, this process would certainly be much easier and it still remains to be seen to what the ECB will eventually compromise on. ECB member Bini Smaghi repeated his stance against what the private bond participation that the Germans are pushing for. The ECB is in a dream world thinking the Greeks can pay back what is owed and the ECB’s polluted balance sheet is the major impediment to a deal. Spanish bonds are no longer immune as their 10 yr yield is rising to an 11 yr high and 5 yr CDS is back above the concerning level of 300 bps, a 5 month high after they sold 8 and 15 yr paper in a total amount that was below what they hoped for. $ and euro swap spreads are spiking to 6 month highs. The Reserve Bank of India raised interest rates as expected but with real interest rates still negative, they hinted at more to come as they admitted they are willing to sacrifice short term growth for long term price stability.