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Morning Notes For November 5th 2010 at Trader’s Narrative

Morning Notes For November 5th 2010

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The following is a guest post by a buy-side analyst working in a US asset management firm. The author’s comments are in italics. I welcome your feedback in the comments:

Change in Private Payrolls: Survey 80 Actual 159 Prior 64 Revised 107
private payrolls est actual Nov 2010

Avg Weekly Hours All Employees Survey 34.2 Actual 34.3 Prior 34.2
Unemployment Rate Survey 9.6% Actual 9.6 Prior 9.6

unemployment by education status Nov 2010

  • Backlash rising against QE – countries including China, Brazil, Germany all were critical of the Fed’s actions; some Asian countries said they were preparing measures to defend their economies. A front-page editorial in a Chinese paper today said that the PBOC needs to hike rates again in response to QE2. China demand an explanation from the Fed on the second round of asset purchases. FT/Reuters
  • From MCHP’s earnings release out Thurs night: “In light of the expected tax law changes coming in January 2011, the highest federal tax rate on dividends is likely to go from 15% currently to 39.6% on January 1, 2011. While we do not know what the current congress or the newly elected congress and President Obama may decide on the expiration of President Bush’s tax cuts, we believe that our investors deserve to pay the lowest tax rate on dividends paid by Microchip. Therefore, Microchip will accelerate its dividend payment from March 2011 into late December 2010
  • Ireland, CDS spreads rose to fresh wides (+23 bps to 599.8) after the FT reported that London clearing house LCH.Clearnet has told members that they may have to deposit more cash in order to trade Irish sovereign debt. The Bank of Spain said that Q3 GDP was flat, decelerating from the 20bps growth seen in the prior quarter as austerity measures are implemented. – Europe jumps back to the top of the list of tail risks.

Ten Year Yields on Irish Sovereign Debt
irish sovereign debt 10 year Nov 2010

  • The Fed will soon grant approval to a group of large healthy banks to raise their dividend payouts; new guidelines could be handed down as soon as next week; the Fed will take a conservative approach and ensure that banks can achieve new Basel capital standards. The Fed will probably approve dividend increases in “batches” so as to avoid placing any institution at a competitive disadvantage. Regulators want healthy banks to “get credit” from the markets for increasing their capital levels. – WSJ

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