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Monday, May 3, 2010

First Quarter 2010 Cunsumer rise 3,2%

World News. Last week was a volatile one for the US equity market. The S&P500 hit a trough of 1,180pts on Tuesday before bouncing back. But by Friday night, it gave back all the gains and more. Instead of a triangle formation, it is likely that the S&P500 completed a "flat formation" last Tuesday. If we are right, it hit a near-term bottom last week and should challenge the 1,120-1,140 level over the next 1-2 weeks before reaching at least a near-term peak. The key support is at 1,181 and a breakdown below this level would indicate that our alternative wavecount is taking place. The S&P500 could have reached an immediate peak of 1,219.80 last Monday . The MSCI Asia ex-Japan stayed below its major resistance trend line, currently at 507pts. For us to turn positive on the index, it needs to overcome this level.

1Q10: GDP rises 3.2% as consumers lead the way
US real GDP growth paces lower to 3.2% in 1Q10 (5.6% in 4Q09), marking the third consecutive quarterly increase. 1Q GDP data were below our expectations of 3.8% as well as market consensus (3.4%). Consumer spending picked up to rise by 3.6% in 1Q10 (1.6% in 4Q09). However, there was a downshift in corporate investment to a growth of 14.8% in 1Q10 (+46.1% in 4Q09) while exports also slowed sharply to 5.8% in 1Q10 from 22.8% in 4Q09. Overall, the 1Q GDP data look encouraging with consumers leading the way. But, the issue is whether the trend is sustainable going into 2H10. The boost from inventories and fiscal support will play out by 2Q, and this will pull headline growth back. Without a sustained increase in job creation, consumer spending will likely to falter. We maintain this year's GDP growth estimate at 2.5%. In our view, the moderate pace of growth meant that the Fed would bide its time before raising interest rate. As such, we maintain our outlook for the Fed funds target rate of 0.50% for 2010 and 1.25% for 2011.