Euro Zone Inflation Slows, German Retail Declines, Opposing Views on Fed Rate Hikes, more…

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Bloomberg: Euro-Area Inflation Slows More Than Forecast Before ECB Meeting

  • Euro-area inflation slowed more than economists forecast, giving ammunition for European Central Bank policy makers who say it’s too early to commit to an exit from monetary stimulus.
  • Consumer-price growth decelerated to 1.4 percent in May — the weakest reading this year — from 1.9 percent a month earlier, Eurostat said on Wednesday. A measure that strips out volatile components such as energy and food fell to 0.9 percent, also weaker than expected. In a separate release, the European Union’s statistics office said unemployment declined to 9.3 percent, its lowest level since March 2009.

Reuters: German retail sales unexpectedly drop in April

  • German retail sales unexpectedly fell in April, data showed on Wednesday, dampening hopes that private consumption will propel growth in Europe’s largest economy this year.
  • The volatile indicator, which is often subject to revision, showed retail sales dropped by 0.2 percent on the month in real terms, the Federal Statistics Office said. That confounded forecasts for a 0.2 percent rise and came after an upwardly revised increase of 0.2 percent in March.
  • On the year, shops saw sales decline by 0.9 percent in April, contrasting with the consensus forecast for a 2.3 percent increase.

Market Watch: U.S. trade gap widens in April, raising doubt for Q2 GDP rebound

  • The trade deficit for goods deteriorated in April and inventories sank, suggesting that an expected economic rebound in the second quarter may not be as robust as thought.
  • The trade gap in goods—services are excluded—widened to $67.6 billion in April from $65.1 billion in March, the government said in its advanced report. The full report will be released on June 2.
  • Wholesale inventories, meanwhile, sank 0.3% in April and retail inventories also fell 0.3%, according to advanced data.

Market Watch: Fed’s Brainard backs another interest-rate hike ‘soon’ but warns inflation could shift outlook

  • A leading Federal Reserve official on Tuesday reinforced expectations of an interest-rate hike next month even as she said recent soft readings on inflation could potentially cause her to reassess her outlook.
  • Brainard also said the Fed will soon to have reduce its $4.5 trillion balance sheet.
  • “And if the economy evolves in line with the SEP median path, the federal-funds rate will likely approach the point at which normalization can be considered well under way before too long, when it will be appropriate to adjust balance sheet policy. I support an approach that retains the federal-funds rate as the primary tool for adjusting monetary policy, sets the balance sheet to shrink in a gradual and predictable way for both Treasury securities and MBS, and avoids spikes in redemptions,” she said.

CNBC: Bullard says US inflation is ‘worrisome’ and markets are wrong on Fed rate path

  • Federal Reserve policymaker James Bullard has declared that the path of inflation in the U.S. is “worrisome”
  • The U.S. central bank’s plan for raising interest rates in the coming years is also too aggressive, asserted the St. Louis Fed president, whose dovish views are well-known.
  • The policymaker – who isn’t currently a voting member of FOMC (Federal Open Market Committee) – claimed that U.S. prices now fall 4.6 percent short of the price level path established between 1995 and 2012, when inflation was accelerating at a pace closer to the Fed’s annual target.
  • Turning to the Fed’s rate hike plans, Bullard reiterated his long-standing view that the U.S. central bank is seeking to hike rates too quickly and by too much. He also posited that the financial markets’ view of the upcoming rate hike trajectory is currently out of lockstep with that of the Fed.

Zero Hedge: Millions Of Americans Just Got An Artificial Boost To Their Credit Score

  • Back in August 2014, we first reported that in what appeared a suspicious attempt to boost the pool of eligible, credit-worthy mortgage and auto recipients, Fair Isaac, the company behind the crucial FICO score that determines every consumer’s credit rating, “will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency.”
  • Stated simply, the definition of the all important FICO score, the most important number at the base of every mortgage application, was set for a series of “adjustments” which would push it higher for millions of Americans.
  • Now, as the Wall Street Journal points out today, efforts to rig the FICO scoring process seems to be bearing some fruit.  The average credit score nationwide hit 700 in April, according to new data from Fair Isaac Corp., which is the highest since at least 2005.
  • Meanwhile, the share of consumers deemed to be riskiest, with a score below 600, hit a new low of roughly 40 million, or 20% of U.S. adults who have FICO scores, according to Fair Isaac. That is down from 20.5% in October and a peak of 25.5% in 2010.

Zero Hedge: In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt

  • Less than a decade after various complex, synthetic, squared, cubed and so on securitized debt structures nearly brought down the financial system, here come “Sovereign Bond-Backed Securities.”
  • Moments ago, the FT reported that in a watershed event for the European – and global – bond markets, Brussels is pressing for sovereign debt from across the eurozone to be “bundled into a new financial instrument and sold to investors as part of a proposal to strengthen the single currency area.”
  • Call it securitized sovereign debt.
  • In the latest attempt by Europe to create a common bond market, a European Commission paper on the future of the euro seen by the Financial Times, advocates the launching of a market of “sovereign bond-backed securities” — packaging different countries’ national debt into a new asset.

Bloomberg: China’s Downgrade Could Lead to a Mountain of Debt

  • The downgrade of China’s debt by Moody’s Investors Service may push Chinese companies to borrow even more money from domestic banks as overseas debt becomes more expensive, increasing risks for the nation’s finance industry.
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