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Morning Notes For Juy 7th 2010 at Trader’s Narrative

Morning Notes For Juy 7th 2010

The following is a guest post by a buy-side analyst working in a US asset management firm. I’ve been enjoying these morning notes for a while and with the author’s permission will share them from now on. The only stipulation from the author is that after you enjoy them, provide some feedback in the comments:

  • As President Barack Obama’s job approval rating continues to track below 50%, Gallup finds his weekly average approval rating among independents down to 38%, the lowest to date. At the same time, 81% of Democrats and 12% of Republicans approve of the job he is doing. – Gallup

Barack Obama approval rating Jul 2010

  • China
    China’s central bank still sees inflation as the biggest risk to its economy, according to Bloomberg News. Chinese stocks had their biggest drop in more than a year last week, but China’s factory wages also rose significantly in response to worker unrest. The dollar peg ultimately means China’s monetary policy is tied to ours, but China’s economy is growing a lot faster, which means the bank has had to put loan restrictions and other measures in place to avert inflation. – FTN
  • China says won’t pursue “nuclear option” of dumping Treasuries and buying gold; repeats that gold is too illiquid and volatile a market to be a major destination of FX reserves – Reuters

  • India
    India’s inflation problem is worse than China’s, with its CPI rising at a 14% year-on-year rate. Bloomberg News says the government blames it on food shortages after a poor harvest last year, but prices of consumer goods are rising, too, suggesting the real problem is too easy monetary policy. The central bank has raised its benchmark rates three times this year, most recently on July 2, but it appears monetary policy is behind the curve. – FTN
  • Europe
    European bank stress tests – we are waiting for specific test criteria (due later this morning), but Reuters is reporting that the tests will assume steep stress scenarios for some of the weaker sovereigns (Portugal, Italy, Ireland, Greece, and Spain) – this could be taken as a positive by the markets as many had wanted to see the banks run through tough scenarios (although the article says that the haircuts assumed on some sovereign debt won’t be as large as some analysts expected); French and German sovereign debt won’t see stress scenarios. – JPM

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2 Responses to “Morning Notes For Juy 7th 2010”  

  1. 1 Warren Peary

    How to interpret economic fundamentals and translate to market action? This is what’s tricky. I’ve noticed a distinct relative strength coming from emerging markets, particularly India during the May-June drop. Also strength from the high-yield bond sector. These are risk assets and tells me the market is not ready to plunge over the cliff despite the problems here and inflation in China and India.

  2. 2 Babak

    Warren, I think these morning notes are supposed to provide color more than anything else. At the same time, keep in mind that today was a quiet day - I’ve been reading these notes for a while and trust me, there have been much more interesting days/notes.

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