China to the rescue

Better than expected economic data out of China is helping to ease some global growth concerns and helping to lift most overseas equity markets. Q2 GDP rose 9.5% y/o/y vs the estimate of 9.3%. Industrial production and retail sales also grew more than forecasted and the news helped to lift the Shanghai index by 1.5% but still not enough to get back Tuesday’s loss. Thailand raised interest rates by 25 bps as expected as they remain firm in their stance against inflation pressures. The Italian parliament will vote on Friday on the current budget proposal and this quickened pace of action has Italian bonds up for a 2nd day after 6 days of losses. Spanish bonds are also higher but Irish debt is getting slammed after the Moody’s call late yesterday. The call itself is late as any country needing a bailout is obviously not investment grade. Ahead of Bernanke’s semi annual testimony today on the economy and monetary policy and after the minutes yesterday that reflected a mixed view on what to do next, don’t expect anything groundbreaking. With the possibility of a 7.4% PPI print tomorrow and 3.6% CPI figure on Friday with sluggish economic growth, the Fed’s hands are truly tied and as seen in today’s Refi figure, the law of diminishing returns of cheap money clearly continues to unfold. Refi’s fell for a 4th straight week to a 10 week low even as the avg 30 yr rate remains historically low at 4.55%. There aren’t many things as interest rate sensitive as a simple refi.

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