Manufacturing, Consumer Data Confirm Steady Economic Outlook

Data exhibiting durable goods orders for the month of November reflected rising confidence amongst businesses as bookings for capital goods excluding aircrafts surpassed expectations.  With median forecasts calling for a 0.4% rise, orders for business equipment reported a 0.9% gain last month.  As a closely examined proxy for company spending, the figure confirms rising sentiment throughout the business sector in the post-election environment.  Total durable goods orders fell 4.6% in November, dragged down by a lull in aircraft orders as Boeing reported 13 orders for planes during the month compared to 85 in October.

Other economic data released today included consumer spending, which displayed modest growth in November at 0.2%, despite personal income posting its first decline in the last nine months.  Spending is expected to rebound in the upcoming months with consumer confidence at historic levels and labor data suggesting full employment.  Further defining the labor market, in a separate report today initial jobless claims displayed a seasonally adjusted 275,000 weekly figure, hitting a six-month high as seasonal volatility generated a larger-than-expected shift in what is still considered a healthy labor backdrop.

Analyzing the overall economic outlook, third quarter GDP figures were finalized today, improving to an annualized 3.5% growth rate from prior estimates of 3.2%.  The pace stands as the fastest in two years and significantly above the 2.2% growth projections for the fourth quarter.    

Monte Paschi Capital Raising Efforts Coming Up Short
In a statement late last night, Italy-based Banca Monte dei Paschi di Siena SpA informed the public that the bank has been unsuccessful in finding a base investor for its 5 billion euro capital raising, which includes a debt-for-equity swap, a stock offering, and the sale of troubled loans.  Officials at the bank went on to say that liquidity has been drying up at a faster pace than anticipated, and the institution may run out of such liquidity in as soon as four months, after previously projecting an eleven-month timetable last week.  The unfolding situation has Monte Paschi on the path towards nationalization, delivering a major blow to its current bondholders, who stand to take losses under the European burden-sharing rules.  With the Italian government recently getting approval for a 20 billion euro rescue package, the nationalization of the oldest bank in the world could stand as the first domino in a series of Italian banks struggling with liquidity.  Overall, shares in Monte Paschi have fallen 86% over the past year, and credit swaps on the bank’s junior bonds now carry an implied 70% chance of default.

In another day of thin trading volumes leading up to the holiday weekend, all three major US stock indices are currently down 0.15%-0.55%, while Treasury yields/swap rates are edging higher, up 1-2 bps across the curve.  Both WTI and Brent crude have pared the majority of yesterday’s losses throughout today’s session, up nearly 1%, trading at $53/barrel and $55/barrel, respectively.