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THE WEEK GONE BY AND THE WEEK AHEAD .
5 July, 2013
Last week the markets attempted to claw back some lost ground after a large sell-off in risk assets owing to worries about QE tapering. However, that feeble attempt was stopped in its works thanks to a strong US payrolls number that set the stage for further USD gains and weakening EM risk appetite. 10 year US Treasuries sold off to 2.75%, the largest one day loss in the last two years. Brent Crude gained all the way to $108 and rupee lost a little bit though the large losses are expected to come in on Monday when the impact on Asian markets will be felt. All in all, risk environment remains very tentative and unclear and all we can say is that we are in for this volatility to continue until portfolios rebalance and some erstwhile fancied countries start to come out of the slumber of reduced corporate earnings and poor policy-making.
The Johnson Redbook Retail Sales Index was up 2.9% in the fourth week of June following a 2.8% gain the prior week. Month-to-date, June was up 2.8% compared to June of last year (relative to a target of a 3.3% gain). Month-over-month showed a 0.5% drop (compared to a flat target). June is a five-week month on the retail calendar ending on July 6th.
Interest rates are rising substantially, choking off demand for refinancing but only limiting demand for purchase mortgages. The refinancing index plunged 16.0 percent in the June 28 week and is at a two-year low. The purchase index, benefiting from what the Mortgage Bankers Association calls still strong home affordability, has been up and down is down 3.0 percent in the latest week. The average rate for conforming loans ($417,500 or less) soared 12 basis points in the week to 4.58 percent. Lay-off announcements, like other labor indicators, are not pointing to improvement for Friday's jobs report. Announcements totaled 39,372 in June, up from 36,398 in May and compared to 37,551 in June last year. The report notes that threats for future layoffs include sequestration cutbacks in government spending and possible effects tied to the implementation of health-care reform.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced on Wednesday that total May exports of $187.1 billion and imports of $232.1 billion resulted in a goods and services deficit of $45.0 billion, up from $40.1 billion in April, revised. May exports were $0.5 billion less than April exports of $187.6 billion. May imports were $4.4 billion more than April imports of Page 2
The European Central Bank (ECB) has sent a very strong signal to markets by saying it will keep rates low for an extended period of time, just weeks after its US counterpart raised the possibility of scaling back its extraordinary monetary easing before the year-end, said economists. Jobless claims decreased by 5,000 to 343,000 in the week ended June 29 from a revised 348,000 in the prior period that was higher than initially reported, the Labor Department said today in Washington. The Bloomberg survey median called for 345,000 claims. No states were estimated and there was nothing unusual in the data, a Labor Department spokesman said shortly before the figures were released. The data were made public one day early due to the Independence Day holiday.
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Time
00:30 IST 17:15 IST 18:25 IST 05:20 IST 05:30 IST 16:30 IST 19:30 IST 20:00 IST 05:30 IST 18:00 IST 19:15 IST 02:00 IST 02:00 IST 18:00 IST 19:25 IST
Country
US US US Japan Japan US US US US US US US US US US
Event
Consumer Credit ICSC-Goldman Store Sales Redbook CGPI (PPI) Bank of Japan Announcement MBA Purchase Applications Wholesale Trade EIA Petroleum Status Report Chain Store Sales Jobless Claims Bloomberg Consumer Comfort Index (Level) Money Supply Fed Balance Sheet Producer Price Index (PPI - M/M change) Consumer Sentiment
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TECHNICAL VIEW
After opening up around 59.5, rupee seemed to be range-bound during the last week which finally closed around 60.235 There are negative signals emanating from technical indicators viewpoint. All medium term (Daily) and short term (hourly) indicators are strongly bearish. We expect INR to continue to weaken, especially after the strong US payrolls report. However, equities markets do not look weak and are expected to support the currency markets too. Overall we see USD in a 60-61.50 range for now with slight weaker bias due to weak global risk appetite.
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