1 Overnight Headline and 4 Items for the Day Ahead

Market strategists at Nomura, including Muhammad Kirdar, highlighted the following headlines overnight and said investors should keep an eye on the following four items for the day ahead:

Headlines:

• Global equities continue to weaken overnight and through the European open amid light data flow.

The Day Ahead:

ECB: Governing Council members Luis Maria Linde and Jens Weidmann speak in Valencia (8:00 EDT) and Halle (9:00 EDT), respectively.

NATO Secretary General Rasmussen will hold a press conference at the conclusion of a two-day meeting among NATO foreign ministers.

Q1 GDP (3rd estimate): Since the first estimate of Q1 GDP, data on net trade have been weaker than the BEA‟s assumptions. In addition, the Quarterly Services Survey (QSS) reported that revenue in the service industry dropped in Q1, most notably in the healthcare sector. However, the BEA had previously assumed relatively strong spending on healthcare-related services. Assuming that all of the downward surprise in healthcare revenues in the QSS translates into a decline in real PCE spending this suggests a fall in our tracking estimate of Q1 GDP to -2.4% from the second estimate of -1.0% (Consensus: -1.8%). Note that there is considerable uncertainty surrounding this estimate, as it is unclear how the BEA will interpret this new QSS data. In our view, it is unlikely that the BEA will take the decline in service spending at face value as there may be complications in accounting for recent changes in healthcare laws due to the recently enacted Affordable Care Act. Nevertheless, if the revision is in line with our forecast, we would discount the sharp drop in growth to start the year as other indicators in Q1 were not as weak as the headline GDP print would imply. Moreover, the recent acceleration in activity suggests that growth has rebounded in Q2 and that the softness in Q1 was likely transitory. (8:30AM ET)

Durable goods orders: Industrial production (excluding transportation) increased in May and business surveys continued to be broadly positive. Therefore, we expect durable goods orders excluding transportation to rise by 0.2% m-o-m (Consensus: 0.3%). Motor vehicle assemblies and orders for Boeing planes both increased in May and should provide support for overall orders. Thus, we forecast a 0.4% m-o-m increase in total durable goods orders in May (Consensus: 0.0%) (8:30AM ET)

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