Sunday, July 1, 2012

Market Commentary July 1, 2012

Market Commentary

A buoyant mood in Europe has investors flowing back into risk and bond yields floating upwards.
A look at today’s data, starting in Canada: real GDP for April clocked-in a little better than expected with an increase of 0.3%. Statistics Canada says mining and energy led the increase while retail trade and the public sector were down.
May’s Industrial Product Price Index was unchanged from April. Price increases for motor vehicles and transportation equipment, and lumber and wood products, were offset mainly by a decline in petroleum and coal products. The Raw Materials Price Index fell 1.0%, largely because of lower crude oil prices.
In the U.S., consumer spending was flat in May while incomes grew by 0.2%. It’s the first time in 6 months spending did not increase. Slow job growth and worries about Europe are believed to have consumers pulling back. The June reading of U.S. consumer sentiment would tend to back that up. The University of Michigan Index dropped more than 6 points to 73.2.
But in Europe the EU leaders appear to have cleared the very low bar that was set for them. They have worked out a proposal that will allow the EU recapitalize banks directly, rather than funneling the money through governments. It’s seen as a loss for Germany and a big win for Italy and Spain. (Insert your own Euro 2012 analogy here.) But it’s still just a short-term move. Yields on Spanish and Italian bonds are down considerably.

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