Why Japan's Good News Isn't So Good

US stock futures weaker, but off their lows; Asia drops as Japanese GDP--while growing--disappoints. You would think global markets would be delighted to hear that Japan had positive GDP growth for the first time in five quarters.Their economy grew 0.9 percent in the second quarter; they are now third G7 country after Germany and France to pull out of recession.

But the gain was less than expected; others noted that it was primarily a result of the stimulus package the country had passed, and that this effect would wane in the fourth quarter as the stimulus winds down.

The Shanghai Composite dropped another 5.8 percent overnight, its biggest one-day drop in nine months, adding to the 12 percent loss over the previous week.

  • NY Manufacturing Index Shows First Growth Since April '07

That, following the weaker retail sales and consumer confidence last week.


1) Futures moved up a bit as the August NY Fed survey was much better than expected, positing its first positive reading since April.

2) No sales improvement in home improvement: Lowe's down 12 percent after its Q2 results missed estimates. Same store sales 9.5 percent, well below most estimates. CEO Robert Niblock noted that the consumers are still "reluctant to take on discretionary projects until signs of economic improvement are more evident."

A cautious consumer will continue to negatively impact the home improvement retailer's third quarter. Earnings guidance of $0.21-$0.25 falls short of the Street's $0.27 forecast, while revenues are projected to fall a greater-than-expected 2 percent to 5 percent (vs. -0.9 percent est.).

The company is also cutting store growth in 2010, to 35 to 45 stores in North America. Some analyst were anticipating they would open 65 stores.

2) BB&T falls 3 percent pre-open after announcing a $750 million common stock offering. Pricing of the shares was not announced, but the regional bank said that proceeds would be used for "general corporate purposes."

3) Capital One Financial is down 4 percent pre-open after the credit card issuer saw a sequential increase in credit card defaults and delinquencies last month.

The company's July net charge-off rate (funds that it now expects it won't ever collect) rose to 9.83 percent, up from 9.73 percent in June. Additionally, accounts that are at least 30 days delinquent rose to 4

4) China to buy $2 billion of U.S. mortgages:China Investment Corp (CIC), the country's $200 billion sovereign wealth fund, is going to buy $2 billion in U.S. mortgages by participating in the U.S. Treasury-backed Public-Private Investment Plan (PPIP).



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