November 11, 2009

GS - MARKET DATA POINTS - 2009.11.11

1) S&P 500 +0.2% after the EU close - closing -0.0% at 1093. Healthcare (+0.5%) outperforming. Financials (-0.5%) underperforming.

2) China October industrial production & retail sales growth slightly above expectations - fixed asset investment growth slightly below - CPI in line. (i) Industrial production growth came in at 16.1% yoy, up from 13.9% yoy in September, consensus was for 15.5% yoy. (ii) Retail sales growth came in at 16.2% yoy, up from 15.5% yoy in September, consensus was for 15.8%. (iii) Year-to-date FAI growth came in at 33.1% yoy, down from 33.3% yoy in September, consensus was for 33.5% yoy. (iv) CPI inflation came in at -0.5%, up from -0.8% in September, consensus was for -0.4% yoy.

3) China October money & credit below expectations. Commercial banks extended Rmb253 billion in CNY loans, vs. consensus expectations of Rmb370 bn. The CNY loans outstanding growth remained unchanged at 34.2% yoy, below consensus expectations of 34.4% yoy. M2 growth came in at 29.4% yoy, consensus was for 29.5% yoy. Despite below-expectations monetary data, the real activity growth remains robust. Therefore, we believe there is no need to be overly concerned about this, especially considering the fact that the level of credit extended tends to be low in October in recent years.

4) China exports & imports growth somewhat below expectations - likely partly due to Mid-Autumn festival being in October this year vs. September last year. Exports growth came in at -13.8% yoy, largely in line with the consensus forecast of -13.2% yoy. Imports growth came in at -6.4% yoy, below consensus of -1.0% yoy. The trade surplus widened to US$24.0 billion, above consensus of US$19.1 billion. The data is very strong in light of the fewer number of working days in October resulting from the shift of the Mid-Autumn Festival which was in October in 2009 and in September in 2008. We believe they suggest that domestic demand growth remains robust and external demand growth has been improving as well.

5) US bank credit demand and availability continue to decline. TrimTabs: Consumer credit plummeted $14.8 billion, or 7.2% annualized, in September. Other types of credit are also declining rapidly. Revolving home equity loans fell $2.4 billion, or 4.8% annualized, in October as fewer consumers tapped home equity lines. Also, commercial and industrial loans plummeted $20.0 billion, or 16.5% annualized, in October as banks maintained tight credit standards for smaller businesses.

6) The composition of the absolute decline in US retail sales since January 2007 - i.e. the composition of the US leg of Jim O'Neill's favourite chart. , On a seasonally-adjusted monthly basis, US retail sales declined by -$16 bn (-5%) from January 2007 to August 2009. The composition of this decline was autos -$13 bn (-18%), building materials -$6 bn (-23%), gasoline stations -$2 bn (-7%), furniture stores -$2 bn (-22%), clothing stores -$1 bn (-6%), electronics and appliance stores -$1 bn (-11%), drug stores +$1 bn (+7%), electronic shopping and mail order +$2 bn (+11%), grocery stores +$3 bn (+7%) and superstores +$4 bn (+$14%). Source:, my own calculations).

7) Default rates for US speculative grade debt now set to peak near 14% in November, vs. expectations of 20% at the height of the panic. FT: Moody’s notes that the pace of defaults has slowed, with only eight corporate debt issuers that it rates failing in October, the lowest monthly total this year. The ratings agency now forecasts that default rates for US junk or speculative grade debt will peak near 14 per cent in November, before falling back swiftly to 4 per cent in a year’s time a far milder turnout than the one-in-five scenario priced in at the height of the panic.

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