Headline PPI print was higher than expected, which may reduce chances of a QE3 launch before the end of this year. S&P 500 is up 8, which we think is partially due to JP Morgan & Chase's (JPM) nicely packaged and well-presented Q2 earnings. What really underlies the nicely looking Q2 earnings is a different story, which is better for someone with more knowledge about JPM and the finance & banking industry to discuss.
Going back to PPI, we certainly over-estimated the impact of lower oil prices as the 0.1% monthly and 0.7% Y/Y increases were significantly above our -1.1% and -0.4% estimates. Core PPI, which excludes food and energy prices, came in at 0.2% higher m/m, in-line with the consensus. Again, this shows that the negative impact on PPI from lower oil prices was much less than we had anticipated. The data may lessen the fear of deflation due to a slowing economy, but it also reduces chances of a QE3, for which the equity market has been yearning.
Lastly, China's Q2 GDP growth rate, which was released last night, was pretty much in-line with expectations. Its industrial production was slightly lower than expected, while retail sales for the month of June came in slightly above expectations. This data is not great, and while it supports the assumption of global economic slowdown, it is also not too bad. But it may keep the Fed and its QE3 at bay.
Again, this shows that the negative impact on PPI from lower oil prices was much less than we had anticipated. Best PPI Claims Service
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