Good morning! Here’s what you need to know.
Europe Is Backsliding. French manufacturing plummeted 2.3% in May, while output dropped 1.7%, far worse than expectations. Italian industrial output declined 1.2%, the largest drop since November 2012. “In one line: Horrible; GDP contraction in the second quarter is now base case,” Pantheon Macro said.
Portuguese Yields Spike. The coupon on Portugal’s 10-year note surged to 4%, the highest since early April, after trading in the parent company of Banco Espirito Santo, Portugal’s biggest bank, had to be suspended on concerns about its solvency. “Espirito’s stresses have brought questions over the underlying health of peripheral banks and the still evolving mechanisms for dealing with struggling institutions back into the spotlight,” Deutsche Bank’s Jim Reid wrote.
Bullard. Describing himself as “the North Pole of inflation hawks,” St. Louis Fed President James Bullard told Bloomberg last night he believes the Fed is going to overshoot its inflation targets and that rates could come up sooner than some investors are currently anticipating. They seem to be ignoring the median projections of the FOMC, which call for a target interest rate of 1.13% at the end of 2015 and 2.5% a year later. “It is a mistake for the market not to go with the median of the committee,” he said. “I think that’s the best indication we have.”
Trimmed Forecast Roundup. Lumber Liquidators and Potbelly’s both cut their 2014 outlooks after Wednesday’s bell; the latter was down 17% after hours. Destination Maternity, a U.S. retailer, delivered a profit warning Thursday,
citing the weak economy.
China Exports Up On US Demand. Chinese exports climbed 7.2% in June on the back of strengthening U.S. consumer demand, WJS said, though this was below expectations of 10%. “The global demand recovery is still on track but the momentum is very modest,” said HSBC economist Ma Xiaoping.
Claims; Trade; Fischer. At 8:30 a.m. we get jobless claims — consensus is for an increase of 1,000 to 316K. At 10:00 a.m. we get wholesale trade data; consensus is for a 0.6% increase in inventories. Fed Vice Chairman Stanley Fischer will speak on financial sector reform at the NBER in Cambridge at 4:30 p.m.
Family Dollar Misses. The discount retailer reported
earnings of $US0.85 per share, which was weaker than the $US0.89 expected by analysts. Comparable store sales fell by 1.8%. “Our results continue to reflect the economic challenges facing our core customer and an intense competitive environment,” said CEO Howard Levine. “Although our sales results remain below our expectations, we are encouraged by the improving trends.”
Chinese Hackers Breach Government Database. From NYT: “The intrusion at the Office of Personnel Management was particularly disturbing because it oversees a system called e-QIP, in which federal employees applying for security clearances enter their most personal information, including financial data. Federal employees who have had security clearances for some time are often required to update their personal information through the website.”
BOE Does Nothing. The Bank of England keeps its benchmark interest rate at 0.5% and its asset purchase plan at 375 billion pounds. This was in line with expectations.
Markets. Stocks are lower around the world.