China gross domestic product at 7.6 percent was, arguably, good enough, even if it is the first sub-8 percent number since 2009. Oil, copper and other commodities rose on a belief that China would continue to cut rates. There has been two cuts in the benchmark interest rate in just a month.
Bottom line: There is indications that China is indeed heading for a "soft landing," but it is still touchy. My bet is that the Communist Party leadership — now in the midst of a major transfer of power — will not take any chances. Any sign of weakness in the third quarter will certainly be met with aggressive spending, including more government spending on infrastructure projects. It's done it before, spending north of $600 billion after the global financial crisis caused millions of Chinese to lose their jobs in 2008.
Recent bank figures indicate that banks have indeed increased their lending in recent months. Don't be surprised if the leadership "engineers" a full-year growth rate of 8 percent or better.
1) What's up in Europe? Even after Moody's downgraded Italian debt, Italy successfully floated 5.25 billion euros ($6.4 billion) in medium- and long-term bonds at lower yields. The three-year was floated at 4.65 percent, lowest since May. Italian 10-year yields are back below 6 percent.
In fact, it looks like we have seen lower rates in Europe ever since the European Union summit.
One worrisome sign: Former Italian Prime Minister Silvio Berlusconi is making noises he may again run for Italian prime minister next year, and suggesting that Italy may even leave the euro. Every Italian I spoke to viewed Berlusconi as a national embarrassment when I was there in the last two weeks, but support for Monti (who said he is not running) and austerity is getting increasingly thin: "All we have seen under Monti is more taxes, nothing else," one despondent tour operator told me.
2) I know everyone is obsessed with JPMorgan Chase's earnings, but look at Wells Fargo, shares are fractionally higher after the bank beat earnings expectations on strong mortgage banking income and better credit quality. The bank reported second-quarter earnings per share of $0.82, a penny higher than analysts’ $0.81 expectation. Wells Fargo, the U.S. leader in home loans, posted mortgage banking income of $2.9 billion — up from a year ago and the previous quarter.
“While the economic recovery remains uneven, we … benefited from signs of stabilization in the housing market,” commented Chairman and CEO John Stumpf. The bank's mortgage banking income gain was on $131 billion of originations, a $2 billion increase sequentially.
Another important point: Net interest margin went up because soured loans it bought from weaker banks in the downturn are resolving better than expected. So you buy something at 70 cents on the dollar and you end up resolving it at 72 cents … that shows up in in net interest income.
3) Global indices are poised to close mostly lower this week after investors have spent the past few days weighing corporate earnings, ambiguity over further easing from the Federal Reserve, and slower economic growth.
—By CNBC’s Bob Pisani
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