Republican House Speaker John Boehner and the rest of the party leaders have been sent back to the drawing board after his plan failed to get sufficient backing yesterday. Meanwhile, this afternoon brings us the first estimate of U.S. 2Q GDP.
Debt ceiling impasse...again; The plan championed by Republican leader Boehner was withdrawn from voting by the chief architect himself yesterday as it proved too controversial, even for his own fellow Republicans. The futures unsurprisingly took another dive on the news and are now down almost 4 percent for the week. There is not much to add at this point except that we are bound for a weekend worth of entertainment so - in what is starting to become a regular recommendation - bring out the popcorn!
U.S. GDP: This week has seen plenty of economic reports released, but none of them have really mattered as the U.S. Congress has been entertainment enough for most market participants. Today, though, we get one of the heavyweights, namely U.S. GDP, which is expected to show that the world's biggest economy grew at an entirely unflattering 1.8 percent (annualised) in the second quarter after a similarly weak 1.9 percent increase in the first quarter. Consumers have been struggling as inflation, led by energy prices, has climbed and consensus only looks for a 0.8 percent increase in personal consumption (2.2 percent in 1Q).
GDP - and consumer spending (PCE) - is not the only thing to keep an eye out for in the report though as it also contains various inflation measures of which the Core PCE Price Index is key. The index rose 1.6 percent (again, annualised) in the first quarter having spent most of 2010 below 1 percent and consensus targets a further rise to 2.3 percent today as price pressures spread to core products.
Spain put on review for a downgrade: Greece may have been all over the news in recent weeks, but that does not imply that the other PIIGS have been forgotten. Moody's has announced that Spain's Aa2 classification has been put on review for a potential downgrade. Spain's 10-year government bond yield now stands at 6.12 percent while the corresponding Italian bond yield is up to 5.94 percent now. Another percentage point increase in these yields and Greece is the least of the Eurozone's worries.
Other economic events: The Chicago PMI is expected to drop a bit to 60 in July when it is released at 13:45 GMT today (13:42 for subscribers) and is one of the key regional PMIs to watch ahead of Monday's ISM Manufacturing report.
From Europe we get a flash estimate of July's CPI where consensus again targets 2.7 percent year-on-year. We also have Swedish and Canadian GDP reports on the agenda today.
Update:
German Retail Sales MoM (Jun) out at 6.3% vs. 1.7% expected and -2.5% prior.
UK Nationwide House Prices MoM (Jul) out at 0.2% vs. -0.2% expected and 0% prior.