Ralph Shell @ 2:14 PM, Friday June 11 2010
This morning the market was shocked with the month to month comparison of the US Retail sales. The experts had guessed that core retail sales would be up 0.1%, but the number came in -1.1%, much less than anticipated. The tepid recovery in consumer spending is probably a response to the jobless recovery, which has helped the big bankers and their Wall Street buddies, but has left many on Main Street struggling to survive.
Contract this number with numbers yesterday released by the Chinese:
Actual Forecast Previous
Retail Sales y/y 18.7% 18.6% 18.5%
Fixed Asset
Investments ytd/t 25.9% 25.8% 26.1%
Industrial
Production y/y 16.5% 17.3% 17.8%
CPI y/y 3.1% 3.0% 2.8%
M2 Money
Supply y/y 21.0% 21.3% 21.5%
The first response to these numbers is amazement with the stunning size of the explosive growth. My second observation is these estimators are really good, because their guesses are so close to the final numbers. Perhaps they should consider becoming an odds maker at sporting events. Then again, how can these Chinese guessers always be so close to the final numbers? Is it possible these numbers are all rigged, and the guessers are the same people who prepare the reports? If so, how do we know the numbers accurately reflect economic activity rather than the dictates of their leaders in controlled economy?
Concern for the value and the future of the euro has reached critical mass, with every one forming an opinion. Open interest at the CME Exchange continues to grow, up 12,629 contracts yesterday to 314,213. Options too are popular, climbing to over 277.000
contracts. With this expansion of trade, the public is becoming aware that sovereign debt and government spending is related and a large part of the problem.
Reduced spending and increased government borrowing will subdue the rate of growth in Europe and the UK, but the US is not without problems. Last week's US employment numbers and today's retail sales report are both confirmations of these difficulties.
The 2H chart of the EUR/USD may be retreating from the recent feeble rally to 1.2150. We prefer to watch from the sideline for the weekend, but are inclined to look for a buy spot next week.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.