“Expect Volatility and Profit From It” — Benjamin Graham

1. Deadly Quebec crash raises doubts about oil trains — the blast, which killed at least five people in Quebec town of Lac-Megantic, is the most serious in a series of accidents involving freight trains. Those include Canadian Pacific (CP) and Berkshire Hathaway’s (BRK.A) BNSF. The accident could strengthen the case for approving TransCanada’s (TRP) Keystone oil pipeline.
2. German exports, industrial output slump — German exports dropped at the sharpest rate since 2009 in May, sliding 2.4% vs -1.4% in April and consensus of -0.4%. Imports grew 1.7% vs +1.2% previously, while the trade surplus tumbled 19.4% on month to €14.1B. The factors hurting German exports include the eurozone debt crisis and the slowdown in China. Meanwhile, industrial production dropped 1% in May vs growth of 2% in April and consensus of -0.5%.
3. Chinese Exports Signal Slowing — CNBC, China’s consumer inflation accelerated in June, driven by a rise in food prices. However, exports in June unexpectedly fell 3.1% vs. a year earlier, the worst drop in years; Chinese imports also sank 0.7%. The data reflect weakness both at home and overseas.
4. White House cuts GDP, deficit forecasts — the Obama administration has trimmed its economic outlook, predicting that GDP will grow 2% this year vs a prior forecast of 2.3%, and 3.1% in 2014 vs 3.2%. The White House’s Office of Management & Budget cited “serious headwinds” for the reduced estimate, such as sequestration, European austerity and China’s slowdown.
5. American Association of Individual Investors (AAII) bullish sentiment — courtesy of BIG, bullish sentiment increased from 30.3% to 42.0%. This is the largest weekly reading since 5/23 and the largest one-week increase since 3/14.

6. BOJ holds steady, cuts inflation outlook — the Bank of Japan has kept its monetary policy unchanged, leaving interest rates at minimum levels and maintaining its pledge to increase base money at an annual pace of ¥60-70T ($600-700B). The BOJ said the economy is “starting to recover moderately,” but cut its FY 2014 real growth forecast to 2.8% from 2.9% and median inflation outlook to 0.6% from 0.7%.
7. China Finance Minister Expects GDP Growth of 7% in 2013 — CNBC, China GDP expanded 7.5% on year in Q2, although that was down from 7.7% in Q1. China’s government has continued to dial down expectations for the country’s economy, with Finance Minister Lou Jiwei forecasting that GDP will rise 7% this year, below official targets of 7.5% and the 7.7% achieved in 2012.

The week ahead — Economic data from Econoday.com: