US Market Update: Spanish Flu and a Depressing Chicago PMI Banish Risk Appetite



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US Market Update: Spanish Flu and a Depressing Chicago PMI Banish Risk Appetite

28.09.2012 17:45 Friday
***Economic Data***
- (IN) India Q2 Current Account: -$16.4B v -$14.2Be
- (BR) Brazil Aug Manufacturing PPI M/M: 0.5% v 0.5% prior; Y/Y: 7.5% v 7.2% prior
- (CL) Chile Aug Manufacturing Index: 3.6% v 1.0%e
- (CL) Chile Aug Unemployment Rate: 6.4% v 6.5%e
- (CL) Chile Aug Total Copper Production: 462.6K v 414.3K tons
- (CL) Chile Aug Retail Sales Y/Y: 11.3% v 7.9%e
- (PL) Poland Central Bank (NBP) Sept Inflation Expectations: 4.1% v 4.1%e
- (PL) Poland Q2 Current Account: -€2.2B v -€2.7Be
- (ZA) South Africa Aug Budget Balance (ZAR): -5.4B v -57.6B prior
- (CA) Canada July Gross Domestic Product M/M: 0.2% v 0.1%e; Y/Y: 1.9% v 2.0%e
- (US) Aug Personal Income: 0.1% v 0.2%e; Personal Spending: 0.5% v 0.5%e
- (US) Aug PCE Deflator M/M: 0.4% v 0.5%e; Y/Y: 1.5% v 1.5%e
- (US) Aug PCE Core M/M: 0.1% v 0.1%e; Y/Y: 1.6% v 1.6%e
- (US) Sept NAPM-Milwaukee: 47.2 v 45.0e
- (BR) Brazil Aug Primary Budget Balance (BRL): 2.997B v 4.1Be; Nominal Budget Balance: -16.1B v -11.9B prior; Net Debt to GDP Ratio: 35.1% v 35.0%e
- (US) Sept Chicago Purchasing Manager: 49.7 v 52.8e
- (US) Sept Final University of Michigan Confidence: 78.3 v 79.0e

- A possible Moody's downgrade of Spain's ratings and a raft of terrible data are keeping US equities in the red this morning. Spain is due to disclose results from a stress test designed to determine the amount bailout funding needed for its banking sector sometime today. Moody's - who's sovereign review was to be complete today - may or may not downgrade the nation's ratings, depending on the results. In the US, markets are unhappy about the sub-50 reading in the September Chicago PMI index, the first number below 50 in three years. There were bad signs among the Chicago sub indexes: the new orders component sunk to 47.4 from 54.8, while the prices paid component jumped to 63.2 from 57, suggesting stagflationary tendencies to some. The August personal income and spending data was in line with recent trends, and the slight sequential uptick was explained by higher gasoline prices. Note that crude has come off of its overnight levels this morning, ticking as low as $91.50 from highs above $92.50. Earlier euro strength has evaporated with the data, as further risk-off sentiment drives funds into dollars. EUR/USD plummeted more than a big figure after the US open, dropping to 1.2840 from an overnight high of around 1.2960.

- Micron's poor Q4 results out yesterday evening provides an unflattering assessment of the semi industry as markets head into the September quarter earnings season. Micron's quarterly loss was steeper than expected and revenues missed expectations. The company is getting squeezed from two directions: both NAND and DRAM prices fell 45% y/y. Demand for both categories fell sequentially while industry oversupply shows no signs of dissipating. However analysts are accentuating the positive and providing support for what's working well, helping to send shares of MU up 3% in the first 30 minutes of trade. MU is around +2% mid morning, helping to keep other semi names in the black on a down day.

- Nike surprised markets with better-than-expected earnings and revenue results in its Q1, however income fell broadly on a y/y basis. There was a lot of focus on Nike's forward-looking orders, notably from China, where orders fell for the first time in years. Worldwide orders were down sharply on a y/y basis. Revenue in both China and North America continues to grow, however. Shares of NKE fell more than 3% after hours, but are gradually regaining lost ground mid morning.

***Looking Ahead***

- 12:00 Spain expected to present bank stress results
- 12:00 (CO) Colombia Aug National Unemployment Rate: No est v 10.9% prior; Urban Unemployment Rate: No est v 11.5% prior
- 15:00 (AR) Argentina Aug Construction Activity M/M: No est v 1.6% prior; Y/Y: No est v 0.6% prior
- 15:00 (AR) Argentina Aug Economic Activity Index M/M: No est v 1.1% prior; Y/Y: No est v 0.0% prior
- 15:30 (MX) Mexico Aug YTD Budget Balance (MXN): No est v -201.0B prior