Plain Vanilla”Better Than Expected”
As expected equity markets got a nice push up from Alcoa earnings. Looks like the earnings season will probably have similar “better than expected” flavor like the one preceding.The market looks bound to new highs.
The news flow on consumer and credit card credit continues to throw shadows on this equity rally. Consumer credit shrank for the seventh month in a row, contracting 12 billion USD in August to 2.46 trillion USD implying -5.8% annual growth rate. Credit-card debt fell for a record 11th straight month, down 9.9 billion USD. Shrinking at annualized rate of 13.1%. The credit outstanding ended at 899.4 billion USD. This could pose important set back to the recovery of U.S. economy as it shows the lenders are reluctant to extend credit to the economy and consumers are keen to reduce its debt. Consumer credit press release. I will post again the Meredith Whitney article explaining the issue in detail. WSJ story: The Credit Crunch Continues
Another piece of information with the same flavor is highlighted in Bloomberg article on retail vacancies. Bloomberg story: U.S. Retail Center Vacancies Rise to 17-Year High, Reis Says. Vacancies in U.S. retail centers reached 17 -year high of 10.3% compared with the last’s reading of 8.4% year earlier.
I refuse to view both the consumer credit data and commercial real estate as lagging indicators as consensus is implying, in a credit crisis this data is leading in my view and will eventually influence the economy and the markets.
Some further worrying housing data. Bloomberg story: Home Sellers in U.S. Cut Prices by $28.4 Billion, Trulia Says.
U.S. initial jobless claims fell 33k to 521k. Bloomberg story: U.S. Initial Jobless Claims Decrease to 10-Month Low of 521,000. Yes they are falling, but still implying 200k job losses a month and I don’t view this positive. 10.5% jobless rate as predicted by Goldman Sachs is no way good news for the global economy. Bloomberg story: U.S. Jobless Rate May Reach 10.5% by End of 2010, Goldman Says.
ECB as expected kept key rate at record low. In a declining dollar environment the ECB doesn’t have any choice. Bloomberg story: Trichet Signals ECB in No Rush to Increase Rates.
Consumer Credit, ECB, Initial Jobless Claims, Jean-Claude Trichet, REIT's