Watchful Waiting:
Kind of a strange end to the trading week was seen on Friday, as a 100 point gain in the DOW off the core PCE was wiped out by $70 oil, concern over the sub-prime mess and the second car-bomb that was found in a UK impound lot.
Then the airport in Glascow was attacked over the week end and now the UK is on critical alert, the highest stage of awareness.
Aside from the sub-prime fiasco-in-waiting, we have both ISM's which figure to print fairly well and Friday's NFP which figures to come in weaker then last month's. A print of 100K-120K likely will indicate to market participants that the US economy is set to expand at a "moderate pace in coming quarters".
Absent the sub-prime situation, it would be an excellent enviorment to invest in; moderate growth and inflation within the Fed's target range, jobs humming along nicely and an expanding global economy. For now it appears that the US consumer will survive the housing asset depreciation, one of the three legs he and she stand on. However-we are not absent the sub-prime problem so it's likely that investors will do what they normally do when things get risky-they buy bonds.
I for one was very struck by the demand for the new i-phone and I see it as a net positive for the US economy. People are obvioulsy willing to spend and although the thinking is that it's too expensive for kids, it's likely to be on everyone's Christmas list and it's likely that millions of them will be under the trees this year. This conformation of consumer strength and demand will not go unnoticed on Wall St.
Whether the problems of the sub-prime calamity spread to a general panic on Wall St. is yet to be decided and no-one has an answer at this point. It's likley that a few more hedge funds will suffer some devestating losses-the count so far is 5. There's no doubt that markets are sesitive to the situation. If push does come to shove, we'll all do well shorting the JPY crosses. For now, it's Watchful Waiting for me.
In the mean time-the BoE is set to raise rates on Thursday, the BoJ is set for an August raise and the ECB for September. The Fed looks likely to be on hold not only for the remainder of this year, but likely into Q1 2008 as well.
If the sub-prime problem doesn't cause a major disruption, carry trades will proceed and GBP/JPY may see 250 and beyond. That's a big "IF" though...
Kind of a strange end to the trading week was seen on Friday, as a 100 point gain in the DOW off the core PCE was wiped out by $70 oil, concern over the sub-prime mess and the second car-bomb that was found in a UK impound lot.
Then the airport in Glascow was attacked over the week end and now the UK is on critical alert, the highest stage of awareness.
Aside from the sub-prime fiasco-in-waiting, we have both ISM's which figure to print fairly well and Friday's NFP which figures to come in weaker then last month's. A print of 100K-120K likely will indicate to market participants that the US economy is set to expand at a "moderate pace in coming quarters".
Absent the sub-prime situation, it would be an excellent enviorment to invest in; moderate growth and inflation within the Fed's target range, jobs humming along nicely and an expanding global economy. For now it appears that the US consumer will survive the housing asset depreciation, one of the three legs he and she stand on. However-we are not absent the sub-prime problem so it's likely that investors will do what they normally do when things get risky-they buy bonds.
I for one was very struck by the demand for the new i-phone and I see it as a net positive for the US economy. People are obvioulsy willing to spend and although the thinking is that it's too expensive for kids, it's likely to be on everyone's Christmas list and it's likely that millions of them will be under the trees this year. This conformation of consumer strength and demand will not go unnoticed on Wall St.
Whether the problems of the sub-prime calamity spread to a general panic on Wall St. is yet to be decided and no-one has an answer at this point. It's likley that a few more hedge funds will suffer some devestating losses-the count so far is 5. There's no doubt that markets are sesitive to the situation. If push does come to shove, we'll all do well shorting the JPY crosses. For now, it's Watchful Waiting for me.
In the mean time-the BoE is set to raise rates on Thursday, the BoJ is set for an August raise and the ECB for September. The Fed looks likely to be on hold not only for the remainder of this year, but likely into Q1 2008 as well.
If the sub-prime problem doesn't cause a major disruption, carry trades will proceed and GBP/JPY may see 250 and beyond. That's a big "IF" though...