by Calculated Risk on 6/26/2011 11:39:00 PM

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
• Schedule for Week of June 26th

The Asian markets are red tonight with the Nikkei off almost 1%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 is off about 2.7 points, and Dow futures are off about 30 points.

Oil: WTI futures are down to $90.60 and Brent is down to $104.47.

Of course we will be watching Greece again tomorrow: The Greek 2 year yield is at 28.3% and the ten year yield is at 16.8%.

Best to all.

by Calculated Risk on 6/26/2011 06:45:00 PM

Although I expect the recovery to remain sluggish and choppy, I do think some of the recent slowdown was temporary, and I expect some pickup in U.S. economic activity in Q3. There are downside risks to this forecast, such as spillover from the European financial crisis, another surge in oil and gasoline prices (or a supply shock), and more rapid fiscal tightening in the U.S. - to name a few risks.

Even though most of the U.S. data will be weak, there might be a few hints of improvement this week, although events overseas might overshadow U.S. economic data once again.

There are several regional manufacturing surveys that will be released this week (Richmond, Dallas and Kansas City), and all will probably show weakness similar to the Philly and Empire State surveys. The Chicago PMI will probably be weak too, and the closely watched ISM manufacturing survey might show contraction (below 50) for the first time since July 2009.

Also the Personal Income and Outlays report for May (to be released Monday) will probably show the first monthly decline in real PCE since early last year. So there will be plenty of "bad news".

However auto sales should be a little better in June than in May, although the supply chain issues are still impacting sales. And falling oil and gasoline prices might lead to a little more positive consumer sentiment - and a pickup in consumer spending in June and July.

On housing, the monthly mortgage delinquency reports from LPS and Fannie Mae will probably show a lower serious delinquency rate (continuing the recent trend). And even though expectations are for the Pending Home Sales index to show a 2% decline in May, housing economist Tom Lawler expects an increase in this index (based on limited data).

And on house prices, expectations are for the Case-Shiller index (NSA) to show a 0.3% decline in April, about half the decline reported in March. However several house prices indexes showed an increase in April:

• From CoreLogic: CoreLogic® Home Price Index Shows First Month-over-Month Increase since mid-2010

• FNC reported:

Despite broad economic and job market weakness, home prices have increased for the first time since the withdrawal of the homebuyer tax credits a year ago.

Based on the latest data on non-distressed home sales (existing and new homes), FNC’s Residential Price Index™ (RPI) indicated that single-family home prices in April were up from March at a seasonally unadjusted rate of 0.5%.

• The FHFA (GSEs only): FHFA House Price Index Rises 0.8 Percent in April; First Monthly Increase Since May 2010

• And Radar Logic went further and predicted the Case-Shiller index will show an increase for April:

Last month, we predicted that the S&P/Case-Shiller 10-City composite for March 2011 would be about 152 and the 20-City composite would be roughly 138. In fact, the 10-City composite was 151.66 and the 20-City composite was 138.16.

This month, we expect the April 2011 10-City composite index to be about 153 and the 20-City index to be roughly 140.

EDITED for clarity: Seasonally April is usually slightly stronged than March, even though March is still a weak month (The NSA index will be below the SA index). However this means the NSA index would show a larger increase than the SA index. That might be a little confusing since S&P reports the NSA index, and I report the SA numbers.

It looks like the sharp house price declines are over for the summer months. I still think prices will fall further in real terms over the next couple of years (inflation adjusted), but I think we are close to the bottom nationally in nominal terms.

Overall most of the news flow will still be negative this week.

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
• Schedule for Week of June 26th

by Calculated Risk on 6/26/2011 01:44:00 PM

From the WSJ: French Banks Submit Plan for Greek Debt Rollover

French banks will propose on Monday ... for private creditors to halve their exposure to Greece by rolling over only about 50% of the Greek government bonds they hold ... Under the proposal, financial institutions would effectively reduce their exposure but tie their hands to Greece for a long period by committing to buy up to 30-year bonds ...

Since some analysts were expecting haircuts of up to 70 percent, rolling over half their debt would be a huge positive for the banks.

The Greek parliament is expect to vote on the new austerity package on Wednesday or Thursday. The German finance minister, Wolfgang Schaeuble, made it clear that the next bailout tranche was contingent on Greece passing the austerity package. From Reuters: No Greek budget cuts, no bailout aid -German FinMin (ht jb)

"If the package is rejected, which no one expects actually, then the prerequisites would no longer exist for the IMF, EU and euro zone countries to release the next tranche of aid," [Wolfgang Schaeuble] told German Sunday newspaper Bild am Sonntag.

Although the Greek government is "confident" the legislation will pass, the reaction in the streets - and the market reaction are less certain.

by Calculated Risk on 6/26/2011 09:14:00 AM

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix
• Schedule for Week of June 26th

Oil prices are down sharply this month - and the announcement last week by the International Energy Agency (IEA) of the release of 60 million barrels of oil from emergency stockpiles (30 million U.S.) pushed oil prices down further.

Brent crude futures fell to $105 per barrel and WTI futures are down to $91 per barrel.

And gasoline prices are still falling. According to GasBuddy.com, prices are now down almost 40 cents per gallon nationally from the recent peak in early May. And it looks like gasoline prices will probably fall some more over the next few weeks ...

Orange County Historical Gas Price Charts Provided by GasBuddy.com

The sharp increase in oil prices in March appeared to impact consumer spending and sentiment. Consumer sentiment, as measured by Reuters / University of Michigan, fell sharply in March to 67.5 from 77.5 in February (and has only recovered slightly to 71.8 in early June).

Personal Consumption Expenditure (PCE) growth also slowed in March. Tomorrow the BEA will release the income and outlay report for May (it will be ugly), but falling gasoline prices should help some in June and July. On Friday, Reuters / University of Michigan will release the final sentiment report for June (might show a slight increase), and falling prices will probably boost sentiment in July.

by Calculated Risk on 6/25/2011 05:55:00 PM

Earlier:
• Summary for Week Ending June 24th
• Unofficial Problem Bank list at 1,001 Institutions and Transition Matrix

This will be busy week for economic data. The key releases will be the ISM manufacturing index on Friday, Case-Shiller house prices (April) on Tuesday, and auto sales on Friday.

Some of these releases will show ongoing weakness such as the ISM manufacturing index and the Chicago PMI. The regional surveys suggest the ISM index will be in the low 50s – or possibly below 50 in June (below 50 would indicate contraction for manufacturing).

However other releases might show some improvement such as auto sales and pending home sales. Of special interest will be the Case-Shiller index for April (a three month average of prices in February, March and April). Other house price indexes have indicated prices increased in April, however, because of the averaging, Case-Shiller might still show a decline.

----- Monday, June 27th -----
8:30 AM: Personal Income and Outlays for May. The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 dollars).

Click on graph for larger image in graph gallery.

PCE increased 0.4% in April, but real PCE only increased 0.1% as the price index for PCE increased 0.3 percent in April.

The consensus is for a 0.4% increase in personal income in May, and a 0.1% increase in personal spending, and for the Core PCE price index to increase 0.2%.

10:30 AM: Dallas Fed Manufacturing Survey for June. The Texas production index increased to 12.7 in May from 8.1 in April.

----- Tuesday, June 28th -----
9:00 AM: S&P/Case-Shiller Home Price Index for April. Although this is the April report, it is really a 3 month average of February, March and April.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

House prices have continued to decline, and the Composite 20 index hit a new post-bubble low in March. The consensus is for prices to decline about 0.3% in April, however other indexes suggest the decline will be less (or even an increase).

10:00 AM: Conference Board's consumer confidence index for June. The consensus is for a slight increase to 61.0 from 60.8 last month, possibly due to slightly lower gasoline prices.

10:00 AM: Richmond Fed Manufacturing Survey for June. The consensus is for the survey to show modest contraction with a reading of -2.

----- Wednesday, June 29th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last couple months suggesting weak home sales through early summer (not counting all cash purchases).

10:00 AM: Pending Home Sales Index for May. The consensus is for a 2% decrease in the index, however economist Tom Lawler is forecasting a possible double digit increase.

----- Thursday, June 30th -----
8:30 AM: The initial weekly unemployment claims report will be released. The number of claims has been elevated for the last couple of months. The consensus is for a decrease to 420,000 from 429,000 last week.

9:45 AM: Chicago Purchasing Managers Index for June. The consensus is for a decrease to 54.0, down from 56.6 in May.

11:00 AM: Kansas City Fed regional Manufacturing Survey for June. The index was at 1 in May, down from 14 in April.

----- Friday, July 1st -----
10:00 AM: Construction Spending for May. The consensus is for no change in construction spending.

10:00 AM: ISM Manufacturing Index for June. The consensus is for a decrease to 51.7 from 53.5 in May. Based on the regional manufacturing surveys, the ISM index could be below 50 for June (indicating contraction).

All day: Light vehicle sales for June. Light vehicle sales are expected to increase to 12.0 million (Seasonally Adjusted Annual Rate), from 11.8 million in May.

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the May sales rate.

Edmunds is forecasting:

The estimated sales volume translates to a Seasonally Adjusted Annualized Rate (SAAR) of 11.9 million in June, according to Edmunds.com analysts. Even with SAAR coming in below 12 million for the second month in a row, Edmunds.com continues to project an annual SAAR of 12.9 light vehicle sales overall in 2011.

The supply chain disruption is impacting sales, however sales will probably pick up in Q3.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for June). The consensus is for a slight increase to 72.0 from the preliminary reading of 71.8.

Best wishes to All!