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March ECB Presser: 2013 GDP Revised Down

The Q&A from today’s ECB press conference revealed that there was “discussion on whether to cut rates but the prevailing consensus was to keep rates unchanged”, leaving the interest rate on the main refinancing operations unchanged at 0.75% along with the interest rates on the marginal lending facility and the deposit facility at 1.50% and 0.00%, respectively.

 

The real call-out of the meeting is the ECB staff’s projections downward target range revision for Eurozone 2013 GDP to between -0.9% to -0.1% versus December’s estimate of-0.9% to  0.3%. Draghi blamed the revision on the worse-than-expected Q4 print of -0.6% Q/Q due to weak domestic demand and falling exports.   The staff’s 2014 GDP estimate is a very “healthy” range of 0.0% to 2.0%.

 

The 2013 CPI range was revised to 1.2 – 2% hinting at a more deflationary outlook versus a December estimate of 1.3% – 2.5%.

 

In his prepared statements, Draghi highlighted recent data that suggests stabilization in 1H 2013 and improvement in 2H 2013. In the Q&A he suggested some positive signs leading to less “fragmentation”:

  • Stronger world demand from exports
  • The ECB’s monetary policy stance will remain accommodative as long as needed
  • Counterparties have so far repaid  €224.8 billion of the net LTROs issued (€500B)
  • Target 2 balances are improving
  • Funding for sovereigns has improved
  • Increased capital flows from the core to the non-core
  • Financial market improvement since July 2012

However when questioned on the difficulty of credit reaching the real economy, especially for small and medium sized enterprises, Draghi had little to say and no specific program in mind to spur lending. Below we show a chart of the weaken credit lines to households and corporations, one piece of evidence of a very clogged environment that should hamper real growth.

 

March ECB Presser: 2013 GDP Revised Down - z. ecb loans

 

 

--Today’s Q&A was packed with questions on the Italian election and how those receiving the most support rejected the fiscal discipline that Draghi advocates. Draghi had this to say:  “markets, despite excitement after the election, have reverted back to where they were before. There’s recognition that these are democratic elections. Much of fiscal adjustment that Italy already went through will now go on auto pilot, and the country has less debt versus 2012 to roll over. You’ve also seen that contagion to other countries is muted, versus the past. This is positive.”

 

--The question of staggeringly high youth unemployment came up again which Draghi dodged, saying it’s up to the individual countries to provide labor market reforms.

 

--On the need for a bailout of Cyprus Draghi said that the Eurogroup is discussing this and a statement could perhaps come in the second part of March. He said Cyprus is a small country but transfer risks could be bigger and it’s important for the Cyprus government to take this opportunity to adhere to anti- money laundering legislation.

 

--On the rumor of the ECB leaving Troika, Draghi called the report “Angst of the week”, and said it was unfounded.

 

As it relates to the EUR/USD, we don’t think the outcome of today’s meeting will have a huge impact on the currency cross. The meeting does suggest bearishness due to a lower 2013 GDP target and more downside to the CPI outlook. However, Draghi still appears armed to issue policy and leverage the bank where necessary, which should continue to support the cross. We think the real inflections over the next days and weeks will come from the uncertainty over Italy’s next government.

 

March ECB Presser: 2013 GDP Revised Down - zz. eur usd

 

Matthew Hedrick

Senior Analyst


INITIAL CLAIMS: LABOR MARKET TRENDS ACCELERATING

Takeaway: Economic Activity, Housing, & Labor Market Trends are Accelerating. Is #GrowthAccelerating taking the hand-off from #GrowthStabilizing?

With the equity market making new highs and our domestic-centric 1Q13 Macro Investment themes of #GrowthStabilizing and #HousingsHammer continuing to play out, the relevant risk management question at hand is whether the data is credibly signaling a hand-off from #Growthstabilizing to #GrowthAccelerating.

 

Across some of the more recent higher frequency economic data, the new orders component within the ISM Mfg, ISM Services, and PMI mfg survey’s all accelerated sequentially in February while yesterday’s Corelogic Home Price data saw January home prices rise +9.7% y/y (up from the prelim estimate of 7.9%) with the preliminary February estimate coming in at +9.7% as well – the second strongest February print in the last 20 years. 

 

If the current slope in the rate of price appreciation in the non-distressed market continues, pricing growth could see an incremental 500bps of upside over the NTM.  With demand rising (Pending, New, & Existing Home sales data) and supply falling (months-inventory making new lows) we think the dynamics are in place to support further pricing strength.

 

In addition the positive housing & economic activity data, Yesterday’s higher than expected ADP number and this morning’s jobless claims data offer confirmation of accelerating improvement in labor market trends.  Today's SA Initial claims print of 340K was a headline positive, while the improvement in the NSA initial claims data accelerated to +9.5% y/y vs. +8.0% in the prior week.   

 

Below is the weekly detailed analysis of the claims data from our head of Financials, Josh Steiner.  If you would like to setup a call with Josh or trial his research, please contact 

 

 

Labor Market Strengthens Further

This past week's NSA (Non-seasonally adjusted) initial jobless claims were better YoY by 9.5%, which is from the 8.0% YoY improvement in the previous week. This print reflects data through March 2, so next week should be the first week that sheds light on whether the sequester is actually having an impact. On a rolling basis (4-wk moving average), NSA claims were better YoY by 4.3%, which was improved from 2.6% in the previous week. These two measures, the YoY change in NSA and rolling NSA claims, are the better indicators of what's really happening in the labor market, and they both indicate the labor market is strengthening.

 

On the SA (seasonally-adjusted) front, the numbers look great. This is what the market is paying attention to. As a reminder, last week was the final week of tailwind for the series and we'll now be gradually shifting from tailwind to headwind over the coming six months. The first chart in the note tells the story well. 

 

The Data

Prior to revision, initial jobless claims fell 4k to 340k from 344k WoW, as the prior week's number was revised up by 3k to 347k. The headline (unrevised) number shows claims were lower by 7k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7k WoW to 348.75k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -4.3% lower YoY, which is a sequential improvement versus the previous week's YoY change of -2.6%

 

INITIAL CLAIMS: LABOR MARKET TRENDS ACCELERATING - JS 1

 

INITIAL CLAIMS: LABOR MARKET TRENDS ACCELERATING - JS 2

 

INITIAL CLAIMS: LABOR MARKET TRENDS ACCELERATING - JS 3

 

INITIAL CLAIMS: LABOR MARKET TRENDS ACCELERATING - JS 4

 

INITIAL CLAIMS: LABOR MARKET TRENDS ACCELERATING - JS 6

 

INITIAL CLAIMS: LABOR MARKET TRENDS ACCELERATING - JS 5

 

Joshua Steiner, CFA

 

Christian B. Drake

 


WHAT TO EXPECT IN MACAU IN MARCH?

This note was originally published March 07, 2013 at 08:55 in Gaming

Anything less than double digit growth would be a disappointment

 

 

Based on the last 3 months of actual growth and factoring in seasonality, we’re projecting 10-15% YoY growth for March.  Excluding the impact of low hold, investors should be disappointed with growth less than double digits.

 

Why should we be disappointed with even high single digit growth?  For one, the hold comp is very easy.  March 2012 VIP hold was the lowest of 2012.  Moreover, March VIP volumes and Mass revenues have historically averaged 6% and 5% sequential growth over February in years when Chinese New Year occurred in February.  A simple calculation using these sequential growth rates yields 15% YoY growth for March, at the high end of our projection.

 

Even with flat MoM revenues, March would still exceed last year by 8%.  Our projection methodology is more comprehensive than these simple sequential analyses but we find them useful as a reasonableness check.  Any way we look at it, March YoY growth should be strong and an acceleration from January and February.  A non-hold related miss from our projection could be indicative of a slowdown in the underlying fundamental trends or the impact from the China corruption crackdown.

 

WHAT TO EXPECT IN MACAU IN MARCH? - m123


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.33%
  • SHORT SIGNALS 78.51%

Stock Report: Hologic (HOLX)

Stock Report: Hologic (HOLX) - HE II HOLX 3 30 13

THE HEDGEYE EDGE

HOLX calls itself the “Women’s Health Company”.  Its principal product lines are Breast Health (predominately mammography) and Diagnostics.  HOLX is the US market leader in both mammography and Pap Tests. 

 

The company has recently had difficulties with its Breast Health product line in F1Q13 (4Q12), and HOLX shares lost ground on the earnings release.  We see this as buying opportunity as we view the current Breast Health weakness as temporary in nature, and not representative of its long-run potential.  

 

In addition to its Breast Health business, we remain bullish on its Diagnostics segment, which is the company’s largest segment.  In the near-term, we expect HOLX Diagnostics to benefit from both rising physician traffic and a recovery in US births.  Longer-term, we see the HOLX’s Diagnostic segment as one of the largest beneficiaries to the Affordable Care Act insurance expansion set to begin in 2014. 

TIMESPAN

INTERMEDIATE TERM (the next 3 months or more)

We’re expecting improving trends in F2Q13 (1Q13) in its Breast Health Segment, and we are already seeing signs of improvement in the macro indicators we follow.  We expect the stock to rebound as the concerns over the Breast Health segment are mitigated by improving trends.

 

LONG-TERM (the next 3 years or less)

HOLX may be the most levered name in the Healthcare space to the pending Insurance Expansion set to take place beginning 2014.  We see a long run-way in both the Diagnostic and Breast Health segment from the newly-insured members.  Within Breast Health, Hologic is at the beginning stages of a long term capital cycle led by their launch of 3D-Tomosynthesis technology and capacity constraints emerging at the customer level.

ONE-YEAR TRAILING CHART

Stock Report: Hologic (HOLX) - HE II HOLX chart 3 30 13


INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT

Takeaway: The momentum in housing and equities is rippling through to the labor market, as NSA jobless claims show significant improvement.

Labor Market Strengthens Further

This past week's NSA (Non-seasonally adjusted) initial jobless claims were better YoY by 9.5%, which is from the 8.0% YoY improvement in the previous week. This print reflects data through March 2, so next week should be the first week that sheds light on whether the sequester is actually having an impact. On a rolling basis (4-wk moving average), NSA claims were better YoY by 4.3%, which was improved from 2.6% in the previous week. These two measures, the YoY change in NSA and rolling NSA claims, are the better indicators of what's really happening in the labor market, and they both indicate the labor market is strengthening.

 

On the SA (seasonally-adjusted) front, the numbers look great. This is what the market is paying attention to. As a reminder, last week was the final week of tailwind for the series and we'll now be gradually shifting from tailwind to headwind over the coming six months. The first chart in the note tells the story well. 

 

The Data

Prior to revision, initial jobless claims fell 4k to 340k from 344k WoW, as the prior week's number was revised up by 3k to 347k. The headline (unrevised) number shows claims were lower by 7k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7k WoW to 348.75k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -4.3% lower YoY, which is a sequential improvement versus the previous week's YoY change of -2.6%

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 1

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 2

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 3

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 4

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 5

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 6

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 7

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 8

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 9

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 10

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 11

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 12

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 13

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 14

 

Yield Spreads Remain a Tailwind

The 2-10 spread rose 3.6 basis points WoW to 169 bps. 1Q13TD, the 2-10 spread is averaging 166 bps, which is higher by 24 bps relative to 4Q12.

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 15

 

INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT - 16

 

 

Joshua Steiner, CFA


Headwinds For Initial Jobless Claims?

Takeaway: The initial jobless claims number will soon face headwinds but that doesn’t mean the labor market is weakening.

Today’s initial jobless claims number of 340,000 beat expectations, and the rolling four-week number hit their best level in five years. That said, this is a seasonally adjusted number, which could face some headwinds in coming months.

 

A number that tells a truer story of the overall picture of the labor market is the non-seasonally adjusted number. In the chart below, take a look at the purple line, which shows rolling claims from September through February.  You’ll see that the non-seasonally adjusted claims number is declining at an accelerating rate. It’s also reaching levels much lower than claims have hit in the past few years.

 

Headwinds For Initial Jobless Claims? - JOBSCLAIMS


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