Today’s Markets
- In Asia, Japan -0.7% to 9448. Hong Kong +0.4% to 22508. China -0.2% to 2701. India -0.0% to 18266.
- In Europe, at midday, London -1.2%. Paris +0.3%. Frankfurt +0.1%.
- Futures at 7:00: Dow +0.2%. S&P +0.3%. Nasdaq +0.1%. Crude -1.4% to $97.90. Gold -0.15% to $1526.90.
Monday’s Economic Calendar
The flood of Federal Reserve money that has supported Wall Street and the rest of the U.S. economy for two and a half years will shrink to a trickle with the conclusion of the Fed’s bond purchases announced Friday.The Fed said it will buy $50 billion of Treasurys, the final series of government bond purchases that marks the last phase of the $600 billion program it launched in November 2010 to prevent another recession.
As a result, once the purchases are concluded June 30, the financial sector will receive only a fraction of the roughly $100 billion a month in easy money it has been getting from the Fed.
…over the last two quarters, the most significant sources of net supply for Treasury securities were households (note that this includes hedge funds), the foreign sector, and banks. The only significant source of new net demand was money market mutual funds, which went from a net seller in the previous period to a net buyer on average over the last two quarters.
Now as for what those sectors did with their money…
So where did sellers of Treasuries invest their funds instead? The sectors that reduced purchases of Treasuries noted above shifted funds into agency-backed securities (this includes agency MBS and debt), corporate bonds, money market funds, and mutual funds. Notably, there was little change in either consumer credit assets or mortgage loans, and sectors responsible for the greatest relative outflows from Treasuries during the period as a whole also reduced investment in equities relative to the average flows over the previous year (i.e., Q4 2009 to Q3 2010).
Dong Tao, the China Economist of Credit Suisse, voiced his worries over the Chinese economy after the weak monetary statistics report.In his note after the publication of monetary statistics, he explicitly said that “the risk of a hard landing is on the rise, in our judgement”. He is particular worried about the problem of distribution of liquidity, which means that banks keep lending to state-own enterprises after series of credit tightening while small- and medium- sized businesses are having difficulties in obtaining credit from the formal banking system, a big problem which has been covered here, here and here.
Oil declined for a second day in New York before reports that may show slowing economic growth in the U.S. and China, curbing fuel demand in the world’s two largest fuel consumers.
Futures dropped as much as 1.5 percent, after the biggest single-session drop in four weeks on June 10. Sales at U.S. retailers probably fell in May for the first time in 11 months and China’s industrial production slowed, according to economists surveyed by Bloomberg before reports scheduled for tomorrow. Saudi Arabia last week signaled its readiness to keep markets adequately supplied after the collapse of OPEC talks.
Gold may decline for a second day in New York as some investors sell the metal to cover losses in other commodities markets and equities.
Crude oil declined for a second day in New York before reports that may show slowing economic growth in the U.S. and China, while tin led industrial metals lower on the London Metal Exchange. The MSCI All-Country World Index of equities touched the lowest level in more than two months. European leaders are struggling to find common ground on a Greek bailout.
Profits at American companies are poised to be one of the few bright spots in the U.S., helping to steady the faltering recovery.
Earnings will climb an average 10 percent a year through 2013, more than three times quicker than the economy, after what has already been the fastest rebound since the late 1940s, JPMorgan Chase & Co. projects. In mounting signs of confidence, Macy’s Inc. (M) has raised its annual profit forecast, Intel Corp. (INTC) and Target Corp. (TGT) increased dividends and DuPont Co. plans to invest more than $500 million to boost production.
Bonus: Town Exposed as Completely Unprepared for Zombie Attack
A city council has been forced to admit it has no plans to deal with a zombie invasion.
A “concerned citizen” used freedom of information laws to reveal what plans Leicester City Council had to deal with a Dawn of the Dead-style attack.
Amused by the request, the council had to admit no such plans existed.
But a council spokeswoman reassured other concerned citizens that while there were no specific plans for a zombie invasion, aspects of its emergency plan might be able to be used in such a situation.
The request, signed by a “concerned citizen”, asked: “Can you please let us know what provisions you have in place in the event of a zombie invasion?
“Having watched several films it is clear that preparation for such an event is poor and one that councils throughout the kingdom must prepare for.
“Please provide any information you may have.”