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Morning Notes For October 25th 2010 at Trader’s Narrative

Morning Notes For October 25th 2010

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:

  • After two anemic holiday retail seasons, U.S. consumers remain budget-conscious in estimating how much money they will lay out on Christmas gifts this year. The average of $715 they predict they will spend is similar to their $740 estimate of last October, although off sharply from $909 in October 2007. – Gallup

christmas spending survey Oct 2010

  • After currency tensions flared ahead of the October 22-23 G20 finance ministers’ meeting in South Korea, the ministers pledged to avoid competitive devaluations, promote policies to boost global growth, reduce excessive imbalances and submit to peer review processes. The ministers also discussed a proposal from the U.S. to set targets to reduce current account imbalances, but it remains to be seen if member countries will agree to make the difficult adjustments—a topic that will resurface at the G20 leaders’ meeting in November. – Roubini Global Economics
  • Goldman Sachs Chief U.S. Economist Jan Hatzius said the Fed may purchase $2 trillion of assets to stimulate the U.S. economy and announce a fresh round of monetary easing on Nov. 3. – Bloomberg
  • QE2: Fed’s Waller (of the St. Louis Fed) says the odds of more easing at the November meeting are quite high; Waller says QE2 may start at $500B and then be raised in increments as high as $250B as needed – Reuters
  • White House deficit commission report due within the next few weeks; the commission is considering eliminating some tax breaks for upper-income Americans, increasing mortgage interest, the child tax credit, as well as the ability to pay for health-insurance with pretax dollars. The commission is also looking at cutting defense spending as well as freezing discretionary spending. Social Security, Medicaid, and Medicare won’t be a part of near-term recommendations. – WSJ
  • Economic Update – from JPMorgan’s B. Kasman - While it is too early to expect a material lift in global growth, we are becoming confident that the seeds are being sowed for a lift to above-trend growth starting in 1H11. On the strength of this week’s data out of China, our global GDP outlook for 2011 (%oya) was marked up for the first time since late April. Revisions to 2011 GDP Growth: China 9.0% (8.6%) – this prompts: Emerging Markets 5.8% (5.6%), Global 3.0% (2.9%). – JPM – In general, when forecasters start raising (or slashing) growth rates, it is not done in a one-off manner, but rather in trends.

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