US Market Update: China Saves Equity Markets from Spain, Horrid Data



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US Market Update: China Saves Equity Markets from Spain, Horrid Data

27.09.2012 17:51 Thursday
***Economic Data***
- (CZ) Czech Central Bank cut Repo Rate by 25 bps to 0.25%
- (BR) Brazil Sept FGV Inflation IGP-M M/M: 1.0% v 1.5%e; Y/Y: 8.1% v 7.7% prior
- (US) Initial Jobless Claims: 359K v 375Ke; Continuing Claims: 3.271M v 3.29Me
- (US) Q2 Final GDP Q/Q Annualized: 1.3% v 1.7%e; Personal Consumption: 1.5% v 1.7%e
- (US) Q2 Final GDP Price Index: 1.6% v 1.6%e; Core PCE Q/Q: 1.7% v 1.8%e
- (US) Aug Durable Goods Orders: -13.2% v -5.0%e; Durables Ex Transportation: -1.6% v +2.0%e; Ex Defense: -12.4% v 5.7% prior; Capital Goods Orders Non-defense Ex Aircraft: +1.1% v -3.4% prior; Capital Goods Shipments Non-defense Ex Aircraft: -0.9% v 0.0% prior
- (US) Aug Pending Home Sales M/M: -2.6% v 0.3%e; Y/Y: 9.6% v 13.5%e
- (US) Weekly EIA Natural Gas Inventories: +80 bcf v +73-79 bcf expected
- (US) Sept Kansas City Fed Manufacturing Activity 2 v 5e

- European and US stocks are up a bit after a three-day slide, thanks mostly to the Chinese reverse repo news. In Europe, Spain is releasing its FY13 budget to mixed reviews, as a fifth region, Castilla La Mancha, asks Madrid for a bailout. Meanwhile, violent street protests continue. ECB's Weidmann seemed to back up comments by German, Dutch and Finnish finance ministers from yesterday, calling "legacy liabilities" a national responsibility and further accentuating the sense that northern Europe has thrown a wrench in the eurozone crisis resolution plan. In the US, the data has not been especially good. The third and final reading of GDP was unexpectedly lower and the headline August durable goods data was very weak, underlining fears about the recent economic slowdown. Note however that analysts are couching the August durable goods data in the usual cautions terms. The headline reading is certainly dire, featuring the steepest monthly decline since the depths of the recession in January 2009. Analysts rightly note that behind this number was a huge and likely temporary drop in defense orders and civilian aircraft bookings, and point out that the key core capital goods orders posting a small 1.1% increase. Weekly claims fell to a two-month low of 359K, while the four-week average fell after five weeks of increases. Crude and gold are regaining their losses from yesterday, but are not heading much higher.

- Shares of Discover Financial are up 3.5% this morning after both earnings and revenue blew out consensus expectations. Note, however, that profits fell slightly on a y/y basis. Executives said that card use continues to move upwards firmly, and clients are not running many very high balances. Consumer name McCormick is down 3.7% after the firm's revenues disappointed. Specialty chemicals name HB Fuller fell as much as 10% before regaining some ground after missing Q3 sales targets and cutting its FY12 revenue outlook. RV manufacturer is up nearly 5% after reporting strong Q4 profits.

- On the M&A front, Tempur-Pedic reached a deal to acquire rival Sealy Corp for $242M plus the assumption of around $750M in debt. The price of $2.20 per share represents a 3% premium to Sealy's prior close of $2.14 per share. Note that Private equity firm Kohlberg Kravis Roberts owns about 44% of Sealy, a remnant of its $1.5B deal in 2004 to take the company private.

***Looking Ahead***

- 12:00 (DE) German Chancellor Merkel speaks in Honor of Helmut Kohl at Anniversary Event
- 13:00 (US) Treasury to sell 7-Year Notes