May

30

Pre-Market News

By Chuck

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Entering another ‘turbulent’ phase?

US AND EUROPEAN DEBT MARKETS FLASH NEW WARNING SIGNALS - TELEGRAPH
- “The debt markets in the US and Europe have begun to flash warning signals yet again, raising fears that the global credit crisis could be entering another turbulent phase.”
- “The cost of insuring against default on the bonds of Lehman Brothers, Merrill Lynch and other big banks and brokerages has surged over the last two weeks, threatening to reach the stress levels seen before the Bear Stearns debacle. Spreads on inter-bank Libor and Euribor rates in Europe are back near record levels.”
- "The steep rise in swap spreads this week is ominous," said John Hussman, head of the Hussman Funds. "The deterioration is in stark contrast to what investors have come to hope since March."

“Willem Sels, a credit analyst at Dresdner Kleinwort, said the banks are beginning to face waves of defaults on credit cards, car loans, and now corporate loans. "We believe we’re entering Phase II. The liquidity crisis has eased a little, but the real credit losses are accelerating. The worst is yet to come," he said.”

Personal Spending/Income numbers came in better than expected, but not better than the prior numbers.

APR PERSONAL INCOME: 0.2% V 0.1%E; PERSONAL SPENDING: 0.2% V 0.2%E
- Prior Personal Income revised from 0.3% to 0.4%

APR PCE CORE M/M: 0.1% V 0.1%E; PCE CORE Y/Y: 2.1% V 2.1%E; PCE DEFLATOR Y/Y: 3.2% V 3.1%E
- No Revisions

Personal spending: +0.2%
Personal income: +0.2%

Adjusted for inflation those numbers are:
0.0
0.1 respectively

Futures shot up on the ‘better than expected’ numbers, but we’ll see if the market reflects any reality later today.  I don’t know what CNBC is spinning this morning on these numbers, I just don’t have the stomach to watch them.  They tend to make me want to cuss up a storm.