U.S. and World News
- Another week passed and there is still no resolution to the Greek debt crisis just days before a €1.6 billion payment is due from Athens to the International Monetary Fund (IMF). Expectations of a deal rose mid-week as Prime Minister Alexis Tsipras submitted a set of reforms that were closer to those demanded by creditors, however these talks soon fell apart. Eurozone finance ministers will meet again on Saturday in a last ditch effort before Tuesday’s deadline. German Chancellor Angela Merkel said the upcoming meeting would be “of decisive importance,” but did not provide any additional detail as to what would happen if a deal is not reached.
- After a six week battle that temporarily failed twice, the Senate voted to grant President Obama ‘fast-track’ authority to negotiate trade deals and expedite them through Congress. With this hurdle cleared, the next step to passing the Trans-Pacific Partnership (TPP) trade deal is for the U.S. and Japan to discuss outstanding bilateral issues at an upcoming meeting in July. If the TPP deal is struck, it would be the largest trade deal since NAFTA and would cover 40% of the world economy.
- As its economy falters from the Middle East Respiratory Syndrome (MERS) virus, South Korea is reported to be planning a stimulus package of more than 15 trillion won ($13.5 billion). The package would aim at cushioning the economic impact of the deadly virus that has killed over 30 people and has resulted in widespread quarantines across the country.
- Equity markets finished negatively this week. The S&P 500 lost 0.39%, closing at 2,101. Similarly, the Dow Jones fell by 0.38% and closed at 17,947. Year to date, the S&P is up 3.08% and the Dow is up 1.87%.
- Yields in the Treasury markets were volatile yet again this week and ended higher than the week prior. The 10 year Treasury bond now yields 2.48% and the 5 year Treasury bond yields 1.76%.
- The spot price of WTI Crude Oil dipped by 0.62% from last week, closing at $59.60 per barrel. In 2015, WTI Oil prices are now up 4.80%.
- The spot price of Gold decreased this week by 2.12% and closed at $1,174.77 per ounce. Year to date, gold prices are down 0.81%.
- Initial jobless claims increased a bit from last week and remain quite low, coming in at 271,000, below consensus expectations of 273,000. The Labor Department noted that no special factors affected claims this week. The four week moving average for claims now stands at 273,750.
- The University of Michigan consumer sentiment index rose to a reading of 96.1, surpassing expectations of 94.6. Both consumers’ sentiment of present situation and expectations for the future improved.
- The headline PCE price index (measure of inflation) rose 0.3% in May, in line with expectations. This was due in large part to a 10.2% increase in gas prices. The core PCE index (excludes food and energy) rose 0.1% in May, also in line with expectations. Over the last 12 months, headline PCE prices are up 0.2% (mainly due to lower energy costs) and core PCE prices are up 1.2%, both consistent with subdued inflation.
Fact of the Week
- Last week, Republican presidential candidate Rand Paul proposed a 14.5% flat income tax. According to the IRS, the $9.1 trillion of adjusted gross income in the US in 2012 would generate $1.32 trillion of tax revenues if it were taxed at this 14.5% rate. This represents an additional $131 billion of revenue over the $1.19 trillion of taxes actually collected in that year.
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