August 14, 2014

BOK Cuts Rate for 1^st Time Since May 2013 to Boost Growth

• Risking inflaming record household debt as it backs government efforts to spur the economy
• Lowered the interest rate to 2.25 from 2.5
• Last month, BOK added 11.7 trillion won ($11.3 billion) stimulus
• Lower borrowing costs could encourage households to add to debt that was 135% of disposable income at the end of 2013
• Reduction follows the decision to expand a lending program for smaller firms by 3 trillion won
• Also unveiled the fiscal package and other measures aimed at boosting credit and encouraging companies to distribute more of their profits in wages and dividends
• Lower borrowing costs, combined with looser rules for home mortgages may accelerate the growth of household debt
• The government plans to boost household income and create more jobs to address the debt issue

Thought

Along with additional government stimulus, BOK decreases interest rate to boost economic growth. This decreased interest rate will take time to interfere economy. The government's goal is to expand real estate. Market already expected BOK to cut the rate; the market reflected the rate before it is announced.

China Seen Taking Steps to Aid Growth After Credit Plunge

• China’s ▼ in credit expansion last month and unexpected slowdown in investment spending flashed warnings on growth
• A property slump and dangers from rising bad loans are making it tougher to sustain the growth in China
• Tools include programs such as pledged supplementary lending that can direct credit to the economy, cuts in reserve requirements or interest rates, and fiscal spending on railways and affordable housing

Euro-Area Pickup Stalls as Big Economies Fail to Grow

• GDP was unchanged QoQ; ▲0.7% YoY
• Germany’s economy ▼0.2% QoQ, the first contraction since 2013
• France unexpectedly stagnated. Italy experienced recession with GDP ▼0.2% QoQ
• Spanish economy expanded at the fastest pace since 2007
• Consumer price ▼0.7% MoM compared with ▲0.1% last month; ▲0.4% YoY
• Core consumer price ▼0.8% MoM, and ▲0.8% YoY
• The Ukraine crisis is also weighing on the economies of eastern Europe
• The Czech unexpectedly stagnated last quarter and Romania’s economy ▼1% QoQ
• Polish growth slowed to 0.6% from 1.1%, and Hungary’s expansion cooled to 0.8% from 1.1%, while still beating estimates

Thought

Slow growth in euro area is anticipated and already reflected in the market. All important economic indicators such as PMI, factory orders and retail sales implied that growth in E.U. was slow down (and somehow contracted) in Q2.

As Ukraine crisis eased and additional stimulus is expected from ECB, the second half will rebound its economy. Yet there are sill risks. As U.S. quickly recovers from the recession, it may start tapering sooner than anticipated. It may effect financial market and therefore E.U.

France Risks EU Deficit Clash After Scrapping Targets

• The French government abandoned its 2014 deficit targets after the economy unexpectedly failed to growth for a second straight quarter
• Risking a clash with European partners striving to meet their own fiscal goals
• French GDP stagnated in Q2; 0% changed (forecasted ▲0.1%)
• The European Commission has already allowed France to delay deficit targets twice in the wake of the region’s sovereign debt crisis
• “While the Q2 weakness should remain temporary for Germany, France remains mired in stagnation due to lack of reform. We expect France to continue to underperform the currency area as a whole.”

Jobless Claims in U.S. Rise to Highest Level in Six Weeks

• Jobless claims ▲ by 21,000 to 311,000, the highest in six weeks (forecasted 295,000)
• The jump represents a departure from a run of low readings that showed employers had been holding firm on staffing levels in order to keep up with demand
• More muted firings typically pave the way for acceleration in job growth
• Employers added more than 200,000 workers to payrolls in July for a six straight month – the first time that’s happened since 1997. Employment ▲209,000 after a 298,000 increase in June
• The jobless rate ▲ to 6.2% from almost six-year low of 6.1%
• Job openings ▲ in June to the highest level in more than 13 years

Thought

This jobless claims is announced weekly. It means that it is highly volatile. Yes, jobless claim increased this week yet the job market is significantly improving (yet Yellen said that there is still room for improvement).

London Leads U.K. Housing Slowdown After Carney Warnings

• An index values in London ▼ to 10 from 30 in June, the lowest since March 2011
• Also shows that surveyors have cut their forecast for price growth as stricter lending rules and the prospect of increased borrowing costs weigh on the market
• In July, demand in the capital ▼ at the fastest pace in six years, after a surge in prices over the previous year stretched affordability and prompted concern a bubble may be forming

August 13, 2014

China Credit Gauge Plunges as Expansion in Money Supply Slows

• China’s broadest measure of new credit ▼ to the lowest since the global financial crisis
• China’s new credit was $385 billion in July (forecasted $780 billion), compared with $1,080 billion in June
• Softness in the housing market is becoming an increasingly drag on the economy
• Property investment ▲13.7% in the first seven months from a year ago, down from an annual rise of 14.1% in the first half
• Newly started property construction ▼12.8% YoY in the seven months
• Property sales ▼16.3% in July, compared with ▼0.2% in June
• Industrial output unexpectedly slowed
• Factory production ▲9% YoY; ▲9.2% in June, fixed-asset investment growth ▼ to 17% YoY (forecasted 17.4%)
• Retail sales ▲12.2% in July YoY (forecasted 12.5%)
• Aggregate financing was 273.1 billion yuan ($44.3 billion) in July
• The aggregate-financing number had three negative components for the month to make the broader figure less than new yuan loans
• Negative bankers’ acceptance bills (416 billion yuan), foreign-currency loans (16.9 billion yuan), and trust loans (15.8 billion yuan)

Thought:

Today's economic indicators are warning sign. Especially decline in new credit shows that PBOC's monetary policy is not working well; people still don't borrow money to invest even though interest rate is low. Additional stimulus is expected even the PBOC suffered from greater budget deficit

Japan’s Economy Shrinks the Most Since 2011 Quake on Tax

• As consumption and investment ▼ after an April sales-tax increase aimed at curbing the world’s biggest debt burden
• GDP ▼6.8% YoY (forecasted -7.1%), compared with ▲6.1% in Q1; ▼1.7% QoQ (forecasted -1.8%) compared with ▲1.5% in Q1
• Household consumption ▼ at an annualized pace of 19.2% QoQ, while private investment ▼9.7%
• The higher sales tax hit consumers who’ve seen little growth in incomes and rising costs of living as the BOJ strokes inflation with unprecedented easing
• CPI ▲3.6% in June YoY – nine times the increase in total cash earnings – with food prices ▲5.1%
• Imports tumbled 20.5% YoY while exports fell 1.8%
• The GDP deflator ▲2% YoY, the first increase in 19 quarters
• The gain reflected the impact of the higher sales levy as well as a rise in material prices and personnel costs

Thought

Depreciated Yen caused increase in net exports. Yet slowdown economic growth and sales-tax have hurt the economic growth. However, stock market already reflected in the market. In fact, Q3 GDP expected to rebound and additional stimulus by BOJ is expected as well.

Korea Unemployment Rate

• Labor force participation rate ▲63.2% in July; ▲0.8% YoY
• The number of employed persons ▲2.0% YoY
• Regular employees ▲3.0%, temporary employees ▲4.7%, daily workers ▼3.3% MoM
• The unemployment rate marked 3.4% in July, ▲0.3% YoY, compared with ▲3.6% last month

Thought

While MoM both regular and temporary employees increased this month, there is a good sign that YoY temporary employees is declined more than 5% while regular employees still increased. Along with additional stimulus expected Aug. 14, Korean market is promising.

Rise in labor market will promote higher income, which increases household spending. After Sewol crisis, which declined household spending in Q2, domestic consumption is expected to rebound.

Worst Retail Sales Showing in Six Months in Slow Start to Third Quarter

• Retail sales was unchanged in July QoQ (forecasted 0.2%) after ▲0.2% in June
• Greater employment opportunities have yet to translate into the incomes needed to invigorate consumers
• A sign the economy will have trouble sustaining the Q2 pickup in growth
• Core retail sales, which exclude cars, gas stations, buildings, etc, ▲0.1%, compared with ▲0.5% last month.
• The U.K. labor-market data showed wages ▼0.2% YoY in Q2 (forecasted -0.1%), the first decline since 2009, compared with ▲0.4% in Q1.
• Even with increased hiring, wages are lagging behind. That’s why ▼unemployment rate doesn’t reflect on retail sales
• With inflation ▲ to 1.9% in June, real wages for many Britons are continuing to decline
• Unemployment is 6.4% compared with 6.3% last month. Jobless claim ▼33,600 (forecasted -30,000). It is the lowest level since 2008

Thought

While inflation rate increases and unemployment drops, U.K. economy looked promising. However, unemployment declined while household income stays almost the same (even declined this month). Core retail sales increased little, which means that housing sales is declining. U.K. just started to expand, but it will slowdown if it can't help the income issue.

Spanish Prices Drop at Fastest Pace Since 2009 Credit Crunch

• As declining wages curbed the pricing power of retailers, Spanish prices ▼0.4% YoY (forecasted 0.3%). Core inflation was 0% and prices ▼1.5% on the month
• Greece and Portugal suffer from deflation and inflation close to Italy, so as Spain now
• Economists forecast euro-area inflation 1.2% next year, compared with ECB’s goal of under 2%

Thought

It is one of the big issues that ECB should consider. Along with Greece, Portugal and Italy, Spanish economy is not going up even stimulus implemented. ECB is expected to put additional stimulus soon.

August 11, 2014

European Stocks Gain with Asia as Bonds Slide; Won Climbs

• As tension eased in Ukraine and t U.S. showed signs of pushing back militants in Iraq
• The euro weakened
• U.S. equities rallied on Aug. 8 Russia said warplanes ended drills near Ukraine. Israel and militants in the Gaza Strip agreed to an Egyptian-brokered truce

Treasuries Fall as Geopolitical Tensions Ease, Yields Dim Allure

• Treasuries ▲as easing political tensions in Ukraine and Gaza reduced demand for the safest assets before the U.S. sells $67 billion of notes and bonds this week
• Gains last week pushed 10-year yield to the lowest in more than a year, with the extra yield on the securities over the consumer-price index reaching the narrowest since April 2013 as geopolitical unrest fueled haven demand
• Treasuries have still underperformed stock this year, with the MSCI All-Country World Index ▲4.4% including reinvested dividends
• While U.S. economic growth rebounded last quarter from the biggest contraction in five years, inflation that has held in check helped lure investors to fixed-income securities

Thought

Like what I told in the "August Week 2 Preview," treasuries fall and stock index rises as geopolitical risks ease. Investors are frightened by geopolitical risks too much. A lot of economic indicators signs a positive signal, especially in U.S., China and U.K.

Fed’s Fischer Says Participation Drop May Reflect Slow Growth

• He said sluggish labor supply growth is a “source of concern”
• It may contribute to a slowdown in longer-run output of economy
• Which also faces a drag from housing and “broad based” slowing across emerging markets
• Falling labor-force participation largely reflects an aging population, though there’s “considerable uncertainty” about how much is due to the sluggish economy
• Share of working-age people in the labor force is 62.9%, near the lowest since 1978
• “Many of those who dropped out of the labor force may be discouraged workers. Further strengthening workers back into the labor market…”
• For the U.S., weakness in housing markets, a drag from government budget cuts and weaker European growth are “all prominent factors that have constrained the pace of economic activity”
• Recoveries in advanced economies have been “well below average” while the pace of growth developing nations “has been disappointing”
• Fischer said the so-called quantitative easing program has been “largely successful.”
• “Raising the rate of interest paid on excess reserves should play a central role in the eventual normalization of short-term interest rates. An overnight reserve repo facility could also play a useful part in setting a floor under money market rates."

Thought

high unemployment rate and increment in discouraged workers and part-time-job-for-economic-reason employ are the issues here. In fact, discouraged workers have been declined from 988 to 741 over a year. But what Fischer worries is that it tends to increase last three months (697K in May, 741K in July). It means that more people quit looking for a job, which will eventually decrease household spending and hurt economy.

Today, I'd like to focus on Asian market

Most of Asian stock increased today. NIKKEI raised 2.38%, which is the biggest increase in three months. Shanghai and Shenzhen also increased 1.38% and 1.48%.

They commonly had a big slump last week. Today's increment is more like a rebound from last week's slump. As geopolitical risks ease and big economic indicators await later this week, investors' expectation rose.

U.S. stock market showed increment yesterday; S&P 500 increased by 0.28%. Thanks to good earning on Sysco, CONS STPL sector increased by 0.76%.

Trading volume was significantly low. As economic indicator and earning season is almost over, there is engine to boost the stock market for now. Good news came from Fischer yesterday that the Fed considers the rising interest rate is the last resort, which means that it has no plan to do it soon. As the Fed keeps the fiscal policy as it is now, no surprise downturn or Fed taping is expected for a while.

EUR depreciated as ECB considers to use monetary policy as growth slowdown recently.

Overall, today's market shows a restricted movement. Not all geopolitical risks are solved (even though it eased) and no significant indicators have released. Similar movement is expected today

Sources:

http://www.bloomberg.com/news/2014-08-11/treasury-real-yield-at-15-month-low-before-67-billion-of-sales.html

http://www.bloomberg.com/news/2014-08-11/fed-s-fischer-says-participation-drop-may-reflect-slow-growth.html

August 7th, 2014

ECB Holds Rates as Ukraine Turmoil Menaces Recovery Hopes

• The ECB kept interest rate unchanged at record lows as Ukraine crisis gets worse
• Deposit rate -0.1% and marginal lending rate 0.4%
• Draghi says that conflict in Ukraine and sanctions against Russia is hurting trade
• “The euro-zone recovery is very fragile and the macro situation fluid. Expect Draghi to elaborate on spillover risks from the Russia-Ukraine crisis.”
• Large-scale asset purchases are an option for dealing with a severe economic shock
• The Bank of England’s Monetary Policy Committee also kept its key interest rate unchanged
• At a record-low 0.5% while its bond-purchase plan stayed at $631 billion

Thought
    Market would expect an additional stimulus to boost economy. Even Italy's recession and ▼ German factory order was due to geopolitical risks, it is obvious that euro-area is not expanding as what it expected.
     Unemployment rate is still high, consumer spending and inflation rate are still below is target. Will E.U. go over the financial crisis (even though it is going over now) soon without additional monetary/fiscal policy? I doubt it. Tensions are getting higher everyday and there are pessimistic economic data showing that its monetary policy is not working enough.

Jobless Claims Fall as Average Drops to Eight-Year Low

• Fewer Americans filed applications for unemployment benefits
• A sign the labor market continues to gain momentum
• ▼14,000 to 289,000 (forecasted ▲ to 304,000)
• Companies are holding on to more workers in an effort to keep up with increased orders and stronger consumer demand, contributing to a virtuous cycle of growth as the economy accelerates
• Fewer layoffs and more jobs would support further gains in income and household spending
• U.S. employers added more than 200,000 works to payrolls in July
• Climbed by 209,000 after 298,000 gain in June, while the jobless rate ▲ to 6.2%
• More Americans entered the labor force seeking work
• Federal Reserve policy makers are monitoring the labor market’s progress as they wind down their stimulus program. Yet they  said that there is still room for improvement

Thought
     Consumer and household spending takes about 70% of economy. As more people seek for job and hired, it is more likely that consumer and household spending will rise. It is also a good sign that the Fed thinks that there is a room for improvement in the labor market. It means that the Fed will keep the low interest rate while purchasing bonds.

Consumer Credit in U.S. Rise on Demand for Car, Student Loans

• ▲$17.3 billion in consumer credit followed a $19.6 billion in May
• Non-revolving loans, including borrowing for cars and college tuition, climbed $16.3 billion
• Revolving credit, which includes credit-card balances, ▲$914.5 million, the smallest advance since February, after a $1.74 billion gain in May
• Stronger employment and gains in home values are giving households the confidence to borrow and make big-ticket purchases such as cars and appliances
• Banks also are showing greater willingness to lend, which could boost consumer demand

Thought
     Even consumer credit declined compared with last month, it still raised by $17.3 billion this month. While labor market shows a significant improvement, other data like manufacturing PMI (55.8 in July), Core Durable Goods Order increased 1.4% in June and Consumer Confidence level increased to 90.9 in June as well.
     So I believe that lower level of consumer credit is not a big concern since the economy is expanding; people don't need to use a lot of credits to buy things. Of course, it is related with household spending but other data shows that household spending is increasing.

S&P500 ▼0.56%, and DJIA ▼0.46% as well. Utilities, which was declined by 1.28% yesterday, had a comeback rise by 1.14%. Russian sanction on U.S., 28 nations of E.U., Australia and Canada on their meat, fish, fruits and other food was one of the main issues in the market. Despite jobless claim was lower than forecast, it wasn't big enough to stop the decline.

USD has been appreciated by 0.03%. Geopolitical risk gets greater and there was no surprise in ECB monetary policy committee. Yet, Draghi speech suggested that economic contraction in EU is temporarily made no big change in EUR/USD currency market.

Sources:

http://www.bloomberg.com/news/2014-08-07/ecb-holds-rates-as-ukraine-turmoil-menaces-recovery-hopes.html

http://www.bloomberg.com/news/2014-08-07/jobless-claims-in-u-s-fall-as-average-drops-to-eight-year-low.html

http://www.bloomberg.com/news/2014-08-07/consumer-credit-in-u-s-rises-on-demand-for-car-student-loans.html

August 5th, 2014

China Services Index Falls to Record Low

• The services Purchasing Managers’ Index ▼ to 50.0 from June’s 53.1
• Suggesting the government’s stimulus measures are failing to gain traction outside of manufacturing
• Signaled that ▼ home prices and new construction are dragging on services
• They account for almost half of GDP
• Showed the weakest expansion of new business in more than five years
• The services report contrasts with the manufacturing PMI, which ▲ in July to an 18-month high of 51.7
• This survey includes hotels and restaurants, transportation and storage, financial intermediation, renting and business activities and post and telecommunications

Shanghai index ▼ 0.15%















Indonesian Economic Growth Slows Challenge to Widodo

• Indonesia’s economic growth eased to the slowest since 2009 as exports and government spending ▼
• GDP ▲ 5.2% in Q2 YoY; ▲ 2.47% MoM
• Widodo promised 7% economic growth by improving infrastructure and manufacturing
• Export numbers have been coming in below expectations.
• Exports ▼ 1.04% YoY; Mining ▼ 0.15% while government consumption ▼ 0.71%. Household consumption ▲ 5.59% and investment ▲ 4.53%
• Monetary policy
• Subsidies that keep local fuel prices low have spurred energy imports
• Straining the trade balance and tying up funds that could be used to build roads, bridges and railways
• “Bank Indonesia cannot afford to ease monetary policy despite lackluster growth and contained inflation pressures. Focus remains on stability and keeping the current-account deficit in check.”

Euro-Area Services Grew Less Than Initially Estimated in July

• Markit Economics’ Purchasing Managers Index ▲ to 54.2 from 52.8 in June
• A composite index of services and manufacturing increased to 53.8, also lower than previously estimated
• Services indexes ▲ in Germany, France and Spain in July
• In Italy, the gauge ▼ 52.8 from 53.9 in June, which was the highest since 2010
• Markit said the recovery in Italy also “remained solid” last month, with France remaining the euro area’s “laggard,” as a slight rebound in services was offset by a “deepening downturn” at manufacturers

U.K. Services Surge at Fastest Pace in Eight Months

• Its Purchasing Managers’ Index for services, the biggest part of the economy, jumped to 59.1 from 57.7 in June; the highest since November and the 19^th straight month above the 50 level
• “The sustained strength will add to calls for interest rates to start rising later this year”
• A composite index covering services, manufacturing and construction ▲ to 58.8 in July from 57.9 in June

FTSE 100 index ▲ 0.07%















Euro zone June retail sales show strongest YoY rise in seven years

• June retail sales ▲ 0.4% MoM; 2.4% YoY
• The strongest YoY rise since March 2007
• Germany and France see the fastest YoY ▲ since February 2011
• The annual rise was driven by a 3.0% ▲ in sales of non-food products
• Electronics, computers, books or textiles
• Also followed by a 2.0% increase in the volume of sales of food, drinks and tobacco
• Analysts saw modestly improving labor markets in most countries and very low consumer price inflation providing some support to consumer spending over the coming months and help euro zone recovery to gradually gain traction
• Unemployment was the lowest level since September 2012
• Inflation remains in the ‘danger zone’ of below 1% since October last year

Sources: http://www.bloomberg.com/news/2014-08-05/china-services-index-falls-to-record-low.html

http://www.bloomberg.com/news/2014-08-05/u-k-services-surge-at-fastest-pace-in-eight-months.html

http://www.reuters.com/article/2014/08/05/eurozone-economy-retail-idUSL6N0QB2YE20140805
http://www.bloomberg.com/news/2014-08-05/indonesia-s-gdp-growth-slows-in-challenge-to-widodo-expansion.html

S&P 500

July 31, 2014

Economy in U.S. grows more than forecast

• The economic expansion in the 2Q picked up where it left off last year, led by ▲ in consumer spending and business investment
• GDP ▲at a 4% in 2Q, exceeding the median forecast, after ▼2.1% in the 1Q.
• The increase matched the average growth rate from July through December of 2013; the strongest six months in a decade
• Policy makers also said slack in the labor market persists even as the economy is picking up, and repeated they will keep interest rates low for a “considerable time” after ending asset purchases
• Surge in inventories ▲1.7% MoM. Stockpiles were rebuilt at a $93.4 billion annualized pace after a $35.2 billion gain in the first three months of the year
• That could mean companies will keep tighter control on the number of goods on hand this quarter, which could cut into economic growth
• Consumer spending, which accounts for almost 70% of the economy, ▲2.5%
• Purchases of durable goods jumped at a 14% annualized rate, the fastest since the 3Q of 2009, when the recovery began
• Companies added 218,000 workers to payrolls in July exceeding the average for the year and showing improving demand is bolstering the job market
• The gain this month followed a 281,000 increase in June that was the strongest since November 2012
• Businesses are limiting dismissals and taking on more workers, spurring consumer confidence and laying the groundwork for a pickup in household spending

EU inflation slowed to 0.4% in July, lowest since 2009

• Euro-area inflation (ECCPEST) unexpectedly slowed in July to the weakest in almost five years, underscoring the European Central Bank’s concerns that the economy is too feeble to drive price growth
• For the past 10 months the inflation rate has been weaker than 1%, less than half the ECB’s goal, while joblessness has remained stubbornly near an all-time high for months
• It looks like inflation will stay under 1% this year
• It is because output gap and the spare capacity in the labor market are so big that they can’t exert much upwards pressure on prices
• For July, the core inflation rate, which excludes volatile items such as energy, food, alcohol and tobacco, clocked in at 0.8%, unchanged from the previous month
• The cost of services ▲ 1.3%
• Stimulus Effect
• The ECB’s announcement to have a negative deposit rate and a program to improve bank lending is its most significant policy to save the euro.
• The ECB warned the economy could take some time to respond to the barrage of stimulus and even left open the door for further action
• While the ECB’s measure have helped push the average yield on bonds from Europe’s most-indebted nations to a record low, they have not yet boosted prices, growth and lending
• The unemployment rate unexpectedly fell in June to 11.5% from 11.6% in May
• Joblessness continued to vary widely across the euro area in June, from a low of 5% in Austria to 24.5% in Spain

Japan’s Average Crash Earnings ▲0.4%

• It was ▲0.6% in May; MoM

Argentina Declared in Default by S&P as Talks Fail

• S&P declared Argentina in default after government missed a deadline for paying interest on $13 billion of restructured bonds
• Talks ended today without an agreement because the banks were unable to come up with a solution for a wider group of holdouts
• All holdout claims would total $15 billion to $20 billion.

Sources:

http://www.bloomberg.com/news/2014-07-30/argentina-defaults-according-to-s-p-as-debt-meetings-continue.html

http://www.bloomberg.com/news/2014-07-31/euro-area-inflation-slowed-to-0-4-in-july-lowest-since-2009.html

http://www.bloomberg.com/news/2014-07-30/economy-in-u-s-grows-more-than-forecast-after-smaller-drop.html

July 28, 2014

• Buyers Dream of Draghi as U.S – Europe Divide Bolsters Treasuries
• As the Federal Reserve moves to end its debt purchases, U.S bond-market bulls are discovering new ally; European Central Bank president Mario Drghi.
• For the first time since 2007, treasuries offer higher yields than government debt in Europe
• Draghi pushed the region’s borrowing costs to record low after announcing an unprecedented set of stimulus measures to prevent deflation (negative i.r.)
• Fed Skeptics
• Now, as the Fed shifts from buying bonds to debate how soon to raise interest rate, sustaining demand from foreigners has never been more important
• Since 2008, the Fed inundated the U.S economy with more than $3 trillion cheap cash with debt purchases aimed at suppressing borrowing costs and restoring demand crippled by financial crisis
• Might have created asset bubbles and unnecessary risks to the economy
• ECB Impact
• Not only ▼interest rate, ECB will start working on quantitative-easing-style plan to purchase asset-backed debt, and introduce a program to encourage banks to lend that may reach 1 trillion euros.

• Orders for U.S capital goods rose after revised May drop
• Orders for U.S businesses equipment rose in June after falling the prior month
• Forming an inconsistent pattern that indicates corporate investment lacks the momentum needed to propel economic growth to a higher level
• Booking for non-military capital goods excluding aircraft (Core Durable Goods Orders)
• ▲1.4% after 1.2% decrease in May.
• Such demand, considered a proxy for future business spending, declined 0.9% over the past three months, dimming the third-quarter outlook.
• Companies are waiting to expand capacity until they believe sales increase will be sustained. However, capital investment decisions are based on longer-term expectations for final demand; so they are probably going to remain cautions.

• U.S. business spending data gives mixed signals on growth
• A mixed reading on the health of U.S business investment on Friday suggested the economy may not have rebounded as strongly in the second quarter as previously believed, but it offered hope for the rest of 2014.
• Core Durable Goods Orders excluding aircraft and non-military goods ▲1.4% after 1.2% decline in May
• However, shipments of these core durable goods ▼1.0%, which is calculated equipment spending in the GDP measurement.
• Decline in shipments of core durable goods suggests that this segment of the economy is unlikely to contribute much to economic activity.
• The economy contracted at a 2.9% in the first quarter, with business spending on equipment at a 2.8%. Consensus of GDP is 2.6% (JPMorgan)
• However, the swing back in core capital goods orders last month offered hope for growth in the third quarter. That trend, if sustained, would be a boost to growth.
• Orders for long-lasting manufactured goods ▲0.7% in June
• Demand increased from transportation to machinery and computers and electronic product, followed a 1.0% drop in May.
• Unfilled orders for durable goods ▲0.8% last month after rising 0.7% in May
• Showing a building up of backlogs that will keep the nation’s factories busy for a while
• Durable goods inventories ▲0.4%.
• A slow pace of inventory accumulation was behind the sharp contraction in output in the first quarter.