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Daily Market Commentary

US$ are showing some serious strength around the world, including against the CAD$ (which is strong by all other comparisons).  The recent pause and hawkish tone of the Fed had the market betting that today's retail sales will surprise on the upside.

Retail sales came in much stronger than expected, rising 1.2% for May (ex-autos).  Those Americans are like spending cyborgs.  We are powerless to stop them, especially when they are given tax rebate cheques from Uncle Sam.  Bank that $600??  I think NOT!  How about a new set of spinner rims and DKNY sunglasses instead!  (made in China).  Speaking of Made in China, import prices rose again, coming in at 17.8% annualized.

Yesterday's Fed Beige Book did not report anything we didn't know already.  The BB is a report from the 12 regions of the Federal Reserve, where each assesses economic conditions in their respective regions.  While several regions reported "stable" economies, all reported slow consumer spending in the face of high energy and food costs (contrary to the above reported numbers).  Credit standards continued to tighten, making housing even weaker in most areas.

The WSJ is reporting that a wave of Hedge fund redemptions could force a lot of asset sales in the next two weeks as leverage is unwound to pay out the withdrawals.

Bonds are trading lower, continuing their decline after one day of relief, following these stronger retail sales numbers.

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