Good morning. Here's what you need to know.
- Markets in Asia were mixed in overnight trading. The Japanese Nikkei 225 fell 1.0%, the Hong Kong Hang Seng rose 2.4%, and the Shanghai Composite fell 0.4%. European markets are in the green across the board, with Spain leading the way, up 2.4%. In the United States, futures point to a positive open.
- Gold is down another 3.6% this morning, trading around $1230 an ounce. Earlier, it hit a low of $1223.20. Meanwhile, U.S. Treasury yields are falling today after a substantial sell-off over the past several sessions. The yield on the 10-year note is currently at 2.58%, down 3 basis points from yesterday's close.
- The third and final estimate for first-quarter U.S. GDP growth revealed that the U.S. economy grew at a 1.8% annualized pace in Q1, down from the 2.4% estimate published by the BEA a month ago. Revisions to personal consumption growth were the main culprit – down to 2.6% from 3.4% previously.
- 1-year interest rate swaps in China fell 33 basis points to 3.75% Wednesday, marking the biggest drop since November 2008. After reaching an all-time high of 5.1% on June 20, the turnaround suggests that tightening liquidity conditions in the Chinese banking system are set to reverse.
- The final reading of first-quarter GDP growth in France revealed that the French economy contracted 0.2% in Q1, in line with previous estimates. After a similar 0.2% contraction in the fourth quarter of 2012, France is now officially in recession.
- GfK AG's first estimate for July consumer confidence suggested that the indicator will rise to the highest level next month since September of 2007. The report's headline index came in at 6.8, up from 6.5 in June. German stocks rallied on the news.
- Australian Prime Minister Julia Gillard was ousted from her post this morning after calling a "spill" – a confidence vote within her own party – which she lost to fellow Labor politician and former Prime Minister Kevin Rudd. Rudd will lead the party into Australia's upcoming general elections, in which Gillard was expected to do poorly.
- Credit rating agency Moody's revised its outlook for the ratings of Toyota and Honda to "stable" from "negative," saying the Japanese auto makers are finally recovering from the 2011 earthquake that took a heavy toll on the Japanese auto industry. Moody's also cited a stronger dollar-yen exchange rate (weaker yen) as supportive.
- The onslaught of speeches by Federal Reserve bank presidents and board members continues today with Richmond Fed President Jeffrey Lacker and Dallas Fed President Richard Fisher, who will appear before the House Financial Services Committee at 10 AM ET. The topic of the testimony is financial regulation and "too big to fail" banking, so we may not hear much on monetary policy from the Fed today.
- The U.S. Treasury will auction $35 billion of 5-year notes this afternoon. The 5-year note has taken the brunt of the sell-off that has hit the Treasury market in May and June, and given the lackluster results of recent auctions, including yesterday's auction of 2-year paper, investors will likely be watching closely to see how demand for 5-year notes shapes up today.
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