The six biggest banks are scheduled to release second quarter results this week. The trading operations are expected to stand out. Will there be any comments about the impact of the tariffs on their customers’ margins which will in turn will impact debt service requirements? Will there be increases in loan loss reserves in anticipation of troubled loans?
What comments will be made about the loosening of capital requirements surrounding the purchasing of Treasuries? [Note: most believe the Treasury/Fed is searching for buyers for the country’s burgeoning debt]
Will there be remarks about loans to non-bank financials which some believe are beginning to exhibit an increase in non-performers?
Considerable insight about the momentum and health of the economy can be gleaned by bank earnings. There is a distinct classification process on all loans and this process can be the proverbial canary in the coal mine.
This week is also filled with key inflation data. Will the statistics surprise again on the downside? As noted several times and as confirmed by the San Francisco Fed, companies, countries and other firms in the distribution process have been absorbing the tariffs instead of passing the increased costs onto the end user in attempt to maintain/increase market share.
How long will or can this continue?
The economic calendar is comprised of several inflationary indicators including the CPI, PPI and import/export prices, retail sales, capacity utilization/industrial production, inventory data, a sentiment indicator and housing statistics.
Last night the foreign markets were mixed. London was up 0.37%, Paris down 0.51%, and Frankfurt down 1.03%. China was up 0.27%, Japan down 0.28% and Hang Seng up 0.26%.
Futures are down 0.25% on tariff bluster.
Long dated Japanese bonds are spiking on the lack of liquidity, upcoming election concerns and fears that the government is overspending. The Japanese 30-year benchmark is near a record high and its 20-year touched the highest yield since 2000. How will this surge in yield affect other sovereign debt? The 10-year is off 3/32 to yield 4.42%.
