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News & Views: Tuesday, August 26


What you need to know for today's trading day.

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

BOJ to stay bullish on prices even as it cuts Japan GDP estimate: sources (Reuters)

Norway to Cut Oil-Production Forecasts as Costs Delay Projects (Bloomberg)

Warren Buffett to Invest in Burger King's Planned Deal for Tim Hortons (WSJ)

French Economy Minister, Arnaud Montebourg, Was Often Out of Step With President (NYTimes)

Amazon Bets on Gamer Website Twitch in $970 Million Deal (Bloomberg)

European sovereign bonds continue to rally today and that tells the story for the rest of the session. Spain is the region's best performer with its 10yr rallying 9.3bps to 2.17%. Interestingly, Spain's bonds continue to outperform Italy's. I think it may be due to the fact that a QE program will feature a higher volume of purchases versus outstanding debt in Spain. Presumably, the percentage of purchases will be similar to the capital guarantees for the European Stability Mechanism (ESM) bailout fund.

Russian President Putin and Ukranian Prime Minister Poroshenko will meet today Belarus at a bilateral meeting for trade talks. There is no separate meeting planned between the two of them to help bring about a ceasefire to east Ukraine. The thinking is that a breakthrough is unlikely today because the talks are more focused on economics.

The Bank of Israel lowered its benchmark rate to 0.25% last night. All economists surveyed in the Bloomberg survey had expected the central bank to stay unchanged. The central bank cited the Gaza conflict as having temporarily hurt private consumption and will have an extended negative impcat on tourism. Accordingly, inflation has declined. BOI Governor Flug said in a post-meeting press conference that the rate cut will fuel a further short-term depreciation in the Shekel in order to make Israeli exports more competitive. It seems to me that all countries - save the US and Britain - are in a race to devalue their currency. With the de facto message from Jackson Hole central bankers being that they should continue to devalue their currency, I'm sure Israel will not be the first central bank we see take action in the near future.

Interestingly, the UK 5/10 curve is 10bps steeper, an astronomical move in a single session. Since its markets were closed yesterday for a bank holiday, this is the reaction to the speech from Deputy Governor Broadbent at Jackson Hole on Sunday. The reaction is that now the BoE might not even make it to 2.5% in the upcoming tightening cycle, a level they have discussed explicitly. The steepening reflects that the BoE is pushing back the initial tightening.

Overnight Data:
- China leading economic index up to 297.7 from 294.0 in June
- New Zealand trade balance (July) down to -692M NZD vs -475M expected, prior 242M

US Economics (Time Zone: EST)

08:30 Durable Goods Orders (July) - 22.6%, expected 8.0%, prior revised up to 2.7%
08:30 Durable Goods ex Transporation - down -0.8%, exp 0.5%, prior revised up to 3.0%
08:30 Cap Goods Shipments Nondef Ex Air - +1.5%, exp 0.7%, prior revised up to 0.9%
08:30 Cap Goods Orders Nondef Ex Air - down -0.5%, exp 0.2%, prior revised up to 5.4%
09:00 FHFA Home Price Index (June) - +0.4%, exp 0.3%, prior 0.4%
09:00 S&P/Case Shiller 20 City MoM (June) - down -0.20% exp 0.0%, prior -0.31%
09:00 S&P/CS YoY - +8.10%, exp 8.30%, prior 9.34%
10:00 Consumer Confidence Index (August) - exp 89.0, prior 90.9
10:00 Richmond Fed - exp 6, prior 7
11:00 Fed to purchase $2b-$2.5b notes in 11-19 year range
11:30 Treasury to sell 4-week bills
1:00 Treasuty to sell $29b 2-year notes


Best Buy (BBY)

Bob Evans Farms (BOBE)
Sanderson Farms (SAFM)

Twitter: @MichaelSedacca

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