The US market rallied, but we see that only as a trading activity.

 

Canadian Economy

No news today for Canada.

The Bottom Line

• The fall housing market should be watched closely. We are expecting the housing prices to go back to 2010 levels in the metro Toronto area. That means less homes will be sold and it might trigger a further slow down in the economy.
• We reiterate that the Canadian market is a sell.

 

The US Economy

US Market Rallied, but closed lower

• The US Producer Price Index (PPI) came out to be just flat MoM
• US retail sales is also reported to be unchanged, under the forecast growth of 0.3%
• The Manufacturing and Trade Sales reported to be 0.7% MoM and 12% YoY, Inventories up 0.4% MoM and 10.6% YoY

The Bottom Line

• We cannot read anything into these data, and the statistics were about July before the market downturn
• Today the US market rallied without any apparent news. We think it is related to trading as option expiry date approaches and the ex-dividend of SPY tomorrow The rally looks like a short covering
• This is the first day that the market closed lower in the last half hour of trading in this week.
• We expect the market to be down but not losing the weeks gains unless there’s shock to the market

 

 

The Europe Economy

French Bank downgrading is well expected

• The UK labor data showed increase in unemployment
• Trade data is flat for July in UK
• Two French banks are downgraded
• It is also reported that Greece and other European banks has seen quite some deposit outflow YTD
• Greece’s ATE bank may need help from Emergency Liquidity Assistance

The Bottom Line

• Time is reminiscence for Euro as the Canadian dollars back in the 1990s. The euro is not an easy trade but we expect it to trade lower.
• News is better than expected because the French bank downgrading was not as severe as expected. BNP Paribas is not downgraded.
• Our opinion is that the fundamentals have not changed in Europe. Even if the leaders are pledging to save Greece, it does not change the situation that Greece’s fiscal debt problem is unsustainable. More over it takes all eurozone countries to reach a consensus, which have not yet be seen.