It was a quiet overnight session, in which the Nikkei was catching up to USDJPY weakness from the past two days, while China dipped once more despite the NDRC's chief economist stating China may cut RRR or conduct more reverse repos in H2 to maintain stable credit as loan growth slows down (or in other words things go back to normal). In Europe ECB's Nowotny decided to undo some of Draghi's recent work when he said that "good economic news" removes the need for a rate cut which in turn pushed the EURUSD higher (and European exports lower), even as former Cyprus central bank Orphanides said the Euro crisis may flare up after the German elections. In the UK Q2 GDP came in slightly stronger than expected at 0.7% vs 0.6% Exp. letting the GBP outperform since a need for the BOE to ease, at least in the short run, is becoming less pertinent. In amusing news, Moody’s late yesterday put six largest U.S. banks on review as it considers the effect of evolving bank resolution policies under Dodd-Frank and international regulations. As such GS, JPM, MS and WFC may be cut.
The only thing on the US docket is New Home Sales due out at 10 am, expected to post a slight decline from 497K to 487K. The Jackson Hole symposium continues.
*Overnight news bulletin from Bloomberg:*
· Treasuries headed for second consecutive weekly loss, with 10Y yields gaining 5.8bps to 2.883%; reached 2.934%, highest in more than two years.
· 5Y and 7Y notes bore brunt of selling, rising 12.1bps and 10.2bps, respectively, amid Fed tapering bets and before Treasury sells the debt next week
· ECB’s Ewald Nowotny said the recent “stream of good news” from the euro-area economy has removed any need to cut interest rates to a fresh record low
· U.K. GDP rose 0.7% in 2Q, more than initial 0.6% estimate, more than initially estimated, helped by construction and manufacturing and a boost from trade
· Radiation spreading from Japan’s crippled Fukushima plant threatens to derail Abe’s efforts to revive nuclear power and deliver the lower energy prices needed to power his economic reforms
· Losses this month in fixed-income markets are making 2013 among the worst years on record for U.S. IG bonds, even exceeding 1994 when the Fed shocked investors by doubling benchmark interest rates in 12 months
· Moody’s late yesterday put six largest U.S. banks on review as it considers the effect of evolving bank resolution policies under Dodd-Frank and international regulations; GS, JPM, MS and WFC may be cut; BAC, C uncertain
· Brazil stepped up efforts to arrest the world’s worst currency decline, announcing a $60b intervention program involving currency swaps and loans
· U.K. and U.S. regulators are preparing to impose fines as soon as mid-September on JPMorgan after an investigation into the bank’s “London Whale” trading losses last year, a person with direct knowledge of the matter said
· Sovereign yields mostly higher, EU peripheral spreads mostly tighter, Euro Stoxx Banks -0.3%. Nikkei rises 2.2% as JPY retreats below 99 level; Shanghai Composite falls. European stocks mised, U.S. equity index-futures fall. WTI crude, gold and copper gain
*Market Recap*
Stocks traded mixed in Europe, with the FTSE-100 index outperforming its peers following the release of better than expected 2nd Q2 GDP reading (Q/Q 0.7% vs Exp. 0.6%). At the same time, hawkish comments by ECB's Nowotny who said that said good economic news removes the need for a rate cut and that good news won't prompt the ECB to tighten ensured that Bunds failed to benefit from lower trading stocks, with the Euribor curve also bear steepening as a result and the EONIA 1y1y forward rising to its highest level since late June.
However even though GBP outperformed its major counterpart, with EUR/GBP below the 100DMA line, the steepening of the UK curve wasn't as aggressive as that observed by the German curve, as market participants continued to pay note to recent comments made by BoE’s Weale who did not rule out further QE.
As such, there is a growing expectation that next week’s speech by Carney will be used by the Governor to realign market expectations of future interest rate hikes with those as envisaged by the BoE. Going forward, market participants will get to digest the release of the latest CPI data from Canada and also New Home Sales report for the month of July out of the US. Keep in mind volumes have already been the lightest in bund futures so far this week (206k at 1037BST) and with UK markets closed on Monday for the August bank holiday the afternoon session in Europe may be uneventful barring any unexpected events.
*Asian Headlines*
PBOC may cut RRR or conduct reverse repurchases in H2 to maintain stable credit as loan growth may slow, according to NDRC's chief economist Fan Jianping. Elsewhere, China's H2 industrial output may grow about 9%, according to a joint report by China Development Bank and NDRC's State Information Centre.
*EU & UK Headlines*
ECB's Nowotny said good economic news removes the need for a rate cut and that good news won't prompt ECB to tighten. Nowotny added that he is cautiously optimistic about the Euro area outlook and that it is too soon whether to say Greece needs a new bailout. Nowotny further commented that ECB's steady hand approach has worked well and also signalled he opposes releasing ECB vote details.
German GDP SA (Q2 F) Q/Q 0.7% vs. Exp. 0.7% (Prev. 0.7%)
German GDP WDA (Q2 F) Y/Y 0.5% vs. Exp. 0.5% (Prev. 0.5%)
German GDP NSA (Q2 F) Y/Y 0.9% vs. Exp. 0.9% (Prev. 0.9%)
German finance minister Schaeuble said Greek unemployment appears to be past trough and that Greek economy may grow next year. Schaeuble added that the situation in Greece is improving and repeated that Greece will need a new aid program.
UK GDP (Q2 P) Q/Q 0.7% vs. Exp. 0.6% (Prev. 0.6%)
UK GDP (Q2 P) Y/Y 1.5% vs. Exp. 1.4% (Prev. 1.4%) - Biggest Y/Y rise since Q1 2011.
- Biggest expenditure contribution to Q/Q growth from net trade.
- Q2 industrial output +0.6% Q/Q, biggest rise since Q4 2010.
UK BBA Loans for House Purchase (Jul) M/M 37200 vs. Exp. 39400 (Prev. 37278, Rev. to 37337)
Barclays prelim month-end extensions Euro agg at +0.03yrs
Barclays prelim month-end extensions UK Gilts +0.07yrs
*US Headlines*
Fed watcher Hilsenrath wrote: "Fed Debates Whether Purchases or Promises Work Better". According to the report Federal Reserve officials gathering in Jackson Hole, Wyo., this week with academics, private bank economists and others will ponder a question that will influence Fed decisions in the coming months: Which of its novel monetary tools are doing the most for the economy? (WSJ)
PIMCO's Mather said the Treasury sell-off is overdone and that the curve is too steep. Mather further added that PIMCO is favouring yield-curve trades in US, Europe and Australia and sees USD strong in the shortterm, but weak in the long-term.
*Equities*
Stocks traded mixed in Europe, with the FTSE-100 index outperforming its peers following the release of better than expected 2nd Q2 GDP reading (Q/Q 0.7% vs Exp. 0.6%). However it was the health care and consumer goods sectors that underperformed, which when combined with the fact that credit spreads are tighter, indicates that the sentiment isn't as cautious as first seems.
Of note, following yesterday's technical glitch at the NASDAQ exchange, NASDAQ executives in internal discussions identified NYSE Arca connectivity as trigger of technology problems, according to a source.
Rating agency Moody's put six largest US banks on review. Said Goldman Sachs, JP Morgan, Morgan Stanley and Wells Fargo may be cut. Added that Bank of America and Citigroup on review, direction uncertain and cites review to consider reduced government support.
*FX*
EUR/USD and GBP/USD traded higher in Europe this morning, supported by the release of better than expected UK GDP report, but also by market participants booking profits on long USD positions which saw the USD index move back below the 200DMA line.
Brazil, Indonesia launch measures to shore up their currencies. (FT-More)
Brazil and Indonesia have moved to stem the declines in their currencies and shore up confidence at the end of a torrid week for emerging markets where local borrowing costs hit a two-year high. The central bank of Latin America’s largest economy said late on Thursday that it would launch a currency intervention programme worth about USD 60bln to ensure liquidity and reduce volatility in the nation’s foreign exchange market.
Goldman Sachs cut its IDR 3-month estimate to 12000 from 10000 per USD, cut its MYR 3-month estimate to 3.40 from 3.20 per USD and also cut THB 3-month estimate to 33.00 from 31.30 per USD.
*Commodities*
American, Jordanian and and Israeli forces are moving towards Damascus, following the recent suspected chemical weapons attack in Syria.
The Israeli military said it bombed a Lebanese target in retaliation for Thursday's rocket attack. There were also comments from Palestinian group that confirmed its Lebanon base was attacked and stated that there was no damage or injuries.
Commerzbank predicts Brent will rise to USD 112 a barrel by year-end.
Consumption of necklaces, bracelets and rings will probably climb to 40mt this year, according to Iskandar Husin, secretary-general of the Indonesian Goldsmiths and Jewelers Association
* * *
DB's Jim Reid recaps the full events from the past 24 hours
A better risk tone has prevailed over the last 24 hours helped by the above-consensus European/Chinese PMIs and a stabilisation in US rates. With UST yields largely unchanged, credit markets had one of their most constructive days of the past month. Indeed, European credit indices tightened back to their pre-FOMC-minutes levels and US credit markets continued on with the rally after European markets had shut. European core bond yields rose which was partly attributed to the bumper PMIs which saw the euroarea composite PMI (51.7) beat expectations by 0.8pts and last month’s reading by 1.2pts. DB’s economists write that with French composite output down and Germany and the euro area up, the implication is for a fairly robust performance by the 'noncore' countries in August (the manufacturing PMIs for Spain and Italy are not released until Sept 2nd). This explained some of the outperformance in Spain’s IBEX (+1.98%) and Italy’s MIB (+2.56%) against the broader Stoxx600 (+0.98%).
Last month DB’s economists said that the pace of the PMI improvement could afford to slow and still be consistent with their H2 GDP growth forecasts. With yesterday’s PMIs that statement is even more relevant. In their view, the upside risks to near-term growth forecasts have increased. Indeed, the ECB’s Nowotny commented overnight in an interview at Jackson Hole that the good economic news out of the euro-area removes the need for a further rate cut. But at the same time, he ruled out an early tightening, saying “the most recent developments will have no immediate effects on the policy of the ECB” (Bloomberg).
Across the Atlantic, equity markets suffered a computer-related trading glitch for the second time in less than a week. The NASDAQ halted trading in equities shortly after noon (NY time) which affected volumes across a number of North American exchanges. Errors in the feed used to disseminate quotes and prices were blamed. The trading halt was lifted shortly before the end of the trading day but this was too late to prevent a large fall in volume market-wide.
Yesterday’s S&P500 volumes were the lowest for a Thursday in at least a year. When NASDAQ trading eventually resumed, there were some noticeable price moves in individual securities including in Apple which gained about 0.8% - but this was helped by another tweet from well-known investor Carl Icahn who said that the tech-giant’s CEO was supportive of a stock buyback. On the data front, there was some focus on weekly initial jobless claims data given that this week coincides with the survey period for August’s payrolls. For the week ended August 17th, jobless claims printed at 336k or 13k higher than last week’s upwardly revised 323k. DB’s economists note that the four-week average fell 2k to 331k which is the lowest since November 2007. There were no special factors cited by the Department of Labor. Our economists point out that historically when jobless claims have averaged below 350k, nonfarm payrolls have grown in excess of +200k. DB continue to expect +190k on the headline (+200k private) and a one-tenth decline in the unemployment rate to 7.3% for August employment (due on September 6th). Note that while there was little reaction from US rates markets to the data flow, the UST curve continues to steepen. The 2/10s curve is at its highest levels in two years and 2s/30s and 2s/5s remain at near two year highs.
This morning we’re seeing a continued unwind of some of the EM weakness experienced this week. High beta EM sovereigns such as Indonesia (-15bp) and Philippines (-8bp) are seeing a strong retracement in spreads. Cash bond markets are generally firmer across the board and S&P500 futures are up 0.2% at 1657. The Nikkei (+2.5%) is leading the gains in Asian equities helped by yesterday’s 1% gain USDJPY. Solid gains are also being recorded on the Hang Seng (+0.5%), KOSPI (+1.4%) and ASX200 (+1.1%). There are still pockets of weakness amongst EM currencies with the USDINR a touch firmer but IDR continuing its selloff against the dollar.
Coming back to the topic of rates, Freddie Mac said yesterday that the average rate for 30-year fixed rate mortgages jumped to a two year high of 4.58% last week, which is up 18bp on the previous week. The 15-year mortgage rate also increased to a two year high of 3.6%. According to Freddie Mac data, the 30- year rate is now more than 125bp higher than the bottom of 3.31% reached on November 21st 2012. The housing data has held up relatively firm amid this backdrop but this is something to keep an eye on over the next few months.
After the US market close, Moody’s placed the senior and subordinated debt ratings of the six largest US bank holding companies on review as it considers reducing its government (or systemic) support assumptions to reflect the impact of US bank resolution policies. Four banks - Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo - are on review for downgrade. Two banks, Bank of America and Citigroup, are on review direction uncertain. Moody’s current ratings on the banks are generally lower than that of S&P’s and a downgrade by Moody’s could mean that more banks fall into the Baa rating category (equivalent of BBB category at S&P).
Turning to the day ahead, we have a relatively quiet day ahead in terms of data flow with just July new home sales in the US, consumer confidence in the Euroarea and Q2 GDP data for Germany and the UK. The Jackson Hole economic summit could also generate some headlines. Reported by Zero Hedge 5 hours ago.
The only thing on the US docket is New Home Sales due out at 10 am, expected to post a slight decline from 497K to 487K. The Jackson Hole symposium continues.
*Overnight news bulletin from Bloomberg:*
· Treasuries headed for second consecutive weekly loss, with 10Y yields gaining 5.8bps to 2.883%; reached 2.934%, highest in more than two years.
· 5Y and 7Y notes bore brunt of selling, rising 12.1bps and 10.2bps, respectively, amid Fed tapering bets and before Treasury sells the debt next week
· ECB’s Ewald Nowotny said the recent “stream of good news” from the euro-area economy has removed any need to cut interest rates to a fresh record low
· U.K. GDP rose 0.7% in 2Q, more than initial 0.6% estimate, more than initially estimated, helped by construction and manufacturing and a boost from trade
· Radiation spreading from Japan’s crippled Fukushima plant threatens to derail Abe’s efforts to revive nuclear power and deliver the lower energy prices needed to power his economic reforms
· Losses this month in fixed-income markets are making 2013 among the worst years on record for U.S. IG bonds, even exceeding 1994 when the Fed shocked investors by doubling benchmark interest rates in 12 months
· Moody’s late yesterday put six largest U.S. banks on review as it considers the effect of evolving bank resolution policies under Dodd-Frank and international regulations; GS, JPM, MS and WFC may be cut; BAC, C uncertain
· Brazil stepped up efforts to arrest the world’s worst currency decline, announcing a $60b intervention program involving currency swaps and loans
· U.K. and U.S. regulators are preparing to impose fines as soon as mid-September on JPMorgan after an investigation into the bank’s “London Whale” trading losses last year, a person with direct knowledge of the matter said
· Sovereign yields mostly higher, EU peripheral spreads mostly tighter, Euro Stoxx Banks -0.3%. Nikkei rises 2.2% as JPY retreats below 99 level; Shanghai Composite falls. European stocks mised, U.S. equity index-futures fall. WTI crude, gold and copper gain
*Market Recap*
Stocks traded mixed in Europe, with the FTSE-100 index outperforming its peers following the release of better than expected 2nd Q2 GDP reading (Q/Q 0.7% vs Exp. 0.6%). At the same time, hawkish comments by ECB's Nowotny who said that said good economic news removes the need for a rate cut and that good news won't prompt the ECB to tighten ensured that Bunds failed to benefit from lower trading stocks, with the Euribor curve also bear steepening as a result and the EONIA 1y1y forward rising to its highest level since late June.
However even though GBP outperformed its major counterpart, with EUR/GBP below the 100DMA line, the steepening of the UK curve wasn't as aggressive as that observed by the German curve, as market participants continued to pay note to recent comments made by BoE’s Weale who did not rule out further QE.
As such, there is a growing expectation that next week’s speech by Carney will be used by the Governor to realign market expectations of future interest rate hikes with those as envisaged by the BoE. Going forward, market participants will get to digest the release of the latest CPI data from Canada and also New Home Sales report for the month of July out of the US. Keep in mind volumes have already been the lightest in bund futures so far this week (206k at 1037BST) and with UK markets closed on Monday for the August bank holiday the afternoon session in Europe may be uneventful barring any unexpected events.
*Asian Headlines*
PBOC may cut RRR or conduct reverse repurchases in H2 to maintain stable credit as loan growth may slow, according to NDRC's chief economist Fan Jianping. Elsewhere, China's H2 industrial output may grow about 9%, according to a joint report by China Development Bank and NDRC's State Information Centre.
*EU & UK Headlines*
ECB's Nowotny said good economic news removes the need for a rate cut and that good news won't prompt ECB to tighten. Nowotny added that he is cautiously optimistic about the Euro area outlook and that it is too soon whether to say Greece needs a new bailout. Nowotny further commented that ECB's steady hand approach has worked well and also signalled he opposes releasing ECB vote details.
German GDP SA (Q2 F) Q/Q 0.7% vs. Exp. 0.7% (Prev. 0.7%)
German GDP WDA (Q2 F) Y/Y 0.5% vs. Exp. 0.5% (Prev. 0.5%)
German GDP NSA (Q2 F) Y/Y 0.9% vs. Exp. 0.9% (Prev. 0.9%)
German finance minister Schaeuble said Greek unemployment appears to be past trough and that Greek economy may grow next year. Schaeuble added that the situation in Greece is improving and repeated that Greece will need a new aid program.
UK GDP (Q2 P) Q/Q 0.7% vs. Exp. 0.6% (Prev. 0.6%)
UK GDP (Q2 P) Y/Y 1.5% vs. Exp. 1.4% (Prev. 1.4%) - Biggest Y/Y rise since Q1 2011.
- Biggest expenditure contribution to Q/Q growth from net trade.
- Q2 industrial output +0.6% Q/Q, biggest rise since Q4 2010.
UK BBA Loans for House Purchase (Jul) M/M 37200 vs. Exp. 39400 (Prev. 37278, Rev. to 37337)
Barclays prelim month-end extensions Euro agg at +0.03yrs
Barclays prelim month-end extensions UK Gilts +0.07yrs
*US Headlines*
Fed watcher Hilsenrath wrote: "Fed Debates Whether Purchases or Promises Work Better". According to the report Federal Reserve officials gathering in Jackson Hole, Wyo., this week with academics, private bank economists and others will ponder a question that will influence Fed decisions in the coming months: Which of its novel monetary tools are doing the most for the economy? (WSJ)
PIMCO's Mather said the Treasury sell-off is overdone and that the curve is too steep. Mather further added that PIMCO is favouring yield-curve trades in US, Europe and Australia and sees USD strong in the shortterm, but weak in the long-term.
*Equities*
Stocks traded mixed in Europe, with the FTSE-100 index outperforming its peers following the release of better than expected 2nd Q2 GDP reading (Q/Q 0.7% vs Exp. 0.6%). However it was the health care and consumer goods sectors that underperformed, which when combined with the fact that credit spreads are tighter, indicates that the sentiment isn't as cautious as first seems.
Of note, following yesterday's technical glitch at the NASDAQ exchange, NASDAQ executives in internal discussions identified NYSE Arca connectivity as trigger of technology problems, according to a source.
Rating agency Moody's put six largest US banks on review. Said Goldman Sachs, JP Morgan, Morgan Stanley and Wells Fargo may be cut. Added that Bank of America and Citigroup on review, direction uncertain and cites review to consider reduced government support.
*FX*
EUR/USD and GBP/USD traded higher in Europe this morning, supported by the release of better than expected UK GDP report, but also by market participants booking profits on long USD positions which saw the USD index move back below the 200DMA line.
Brazil, Indonesia launch measures to shore up their currencies. (FT-More)
Brazil and Indonesia have moved to stem the declines in their currencies and shore up confidence at the end of a torrid week for emerging markets where local borrowing costs hit a two-year high. The central bank of Latin America’s largest economy said late on Thursday that it would launch a currency intervention programme worth about USD 60bln to ensure liquidity and reduce volatility in the nation’s foreign exchange market.
Goldman Sachs cut its IDR 3-month estimate to 12000 from 10000 per USD, cut its MYR 3-month estimate to 3.40 from 3.20 per USD and also cut THB 3-month estimate to 33.00 from 31.30 per USD.
*Commodities*
American, Jordanian and and Israeli forces are moving towards Damascus, following the recent suspected chemical weapons attack in Syria.
The Israeli military said it bombed a Lebanese target in retaliation for Thursday's rocket attack. There were also comments from Palestinian group that confirmed its Lebanon base was attacked and stated that there was no damage or injuries.
Commerzbank predicts Brent will rise to USD 112 a barrel by year-end.
Consumption of necklaces, bracelets and rings will probably climb to 40mt this year, according to Iskandar Husin, secretary-general of the Indonesian Goldsmiths and Jewelers Association
* * *
DB's Jim Reid recaps the full events from the past 24 hours
A better risk tone has prevailed over the last 24 hours helped by the above-consensus European/Chinese PMIs and a stabilisation in US rates. With UST yields largely unchanged, credit markets had one of their most constructive days of the past month. Indeed, European credit indices tightened back to their pre-FOMC-minutes levels and US credit markets continued on with the rally after European markets had shut. European core bond yields rose which was partly attributed to the bumper PMIs which saw the euroarea composite PMI (51.7) beat expectations by 0.8pts and last month’s reading by 1.2pts. DB’s economists write that with French composite output down and Germany and the euro area up, the implication is for a fairly robust performance by the 'noncore' countries in August (the manufacturing PMIs for Spain and Italy are not released until Sept 2nd). This explained some of the outperformance in Spain’s IBEX (+1.98%) and Italy’s MIB (+2.56%) against the broader Stoxx600 (+0.98%).
Last month DB’s economists said that the pace of the PMI improvement could afford to slow and still be consistent with their H2 GDP growth forecasts. With yesterday’s PMIs that statement is even more relevant. In their view, the upside risks to near-term growth forecasts have increased. Indeed, the ECB’s Nowotny commented overnight in an interview at Jackson Hole that the good economic news out of the euro-area removes the need for a further rate cut. But at the same time, he ruled out an early tightening, saying “the most recent developments will have no immediate effects on the policy of the ECB” (Bloomberg).
Across the Atlantic, equity markets suffered a computer-related trading glitch for the second time in less than a week. The NASDAQ halted trading in equities shortly after noon (NY time) which affected volumes across a number of North American exchanges. Errors in the feed used to disseminate quotes and prices were blamed. The trading halt was lifted shortly before the end of the trading day but this was too late to prevent a large fall in volume market-wide.
Yesterday’s S&P500 volumes were the lowest for a Thursday in at least a year. When NASDAQ trading eventually resumed, there were some noticeable price moves in individual securities including in Apple which gained about 0.8% - but this was helped by another tweet from well-known investor Carl Icahn who said that the tech-giant’s CEO was supportive of a stock buyback. On the data front, there was some focus on weekly initial jobless claims data given that this week coincides with the survey period for August’s payrolls. For the week ended August 17th, jobless claims printed at 336k or 13k higher than last week’s upwardly revised 323k. DB’s economists note that the four-week average fell 2k to 331k which is the lowest since November 2007. There were no special factors cited by the Department of Labor. Our economists point out that historically when jobless claims have averaged below 350k, nonfarm payrolls have grown in excess of +200k. DB continue to expect +190k on the headline (+200k private) and a one-tenth decline in the unemployment rate to 7.3% for August employment (due on September 6th). Note that while there was little reaction from US rates markets to the data flow, the UST curve continues to steepen. The 2/10s curve is at its highest levels in two years and 2s/30s and 2s/5s remain at near two year highs.
This morning we’re seeing a continued unwind of some of the EM weakness experienced this week. High beta EM sovereigns such as Indonesia (-15bp) and Philippines (-8bp) are seeing a strong retracement in spreads. Cash bond markets are generally firmer across the board and S&P500 futures are up 0.2% at 1657. The Nikkei (+2.5%) is leading the gains in Asian equities helped by yesterday’s 1% gain USDJPY. Solid gains are also being recorded on the Hang Seng (+0.5%), KOSPI (+1.4%) and ASX200 (+1.1%). There are still pockets of weakness amongst EM currencies with the USDINR a touch firmer but IDR continuing its selloff against the dollar.
Coming back to the topic of rates, Freddie Mac said yesterday that the average rate for 30-year fixed rate mortgages jumped to a two year high of 4.58% last week, which is up 18bp on the previous week. The 15-year mortgage rate also increased to a two year high of 3.6%. According to Freddie Mac data, the 30- year rate is now more than 125bp higher than the bottom of 3.31% reached on November 21st 2012. The housing data has held up relatively firm amid this backdrop but this is something to keep an eye on over the next few months.
After the US market close, Moody’s placed the senior and subordinated debt ratings of the six largest US bank holding companies on review as it considers reducing its government (or systemic) support assumptions to reflect the impact of US bank resolution policies. Four banks - Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo - are on review for downgrade. Two banks, Bank of America and Citigroup, are on review direction uncertain. Moody’s current ratings on the banks are generally lower than that of S&P’s and a downgrade by Moody’s could mean that more banks fall into the Baa rating category (equivalent of BBB category at S&P).
Turning to the day ahead, we have a relatively quiet day ahead in terms of data flow with just July new home sales in the US, consumer confidence in the Euroarea and Q2 GDP data for Germany and the UK. The Jackson Hole economic summit could also generate some headlines. Reported by Zero Hedge 5 hours ago.