Next Week At A Glance

This story features MYER HOLDINGS LIMITED. For more info SHARE ANALYSIS: MYR

By Greg Peel

We end the week on a note of uncertainty, following a panic fall from complacent highs and a subsequent relief bounce into limbo. Where to now? Wall Street's not sure. Europe is still on edge. China has its own policies to deal with.

The VIX volatility index on the S&P 500 tells us the story. It is safe to say that a period of “normal” market activity would see the VIX range trade between 20 and 30. A move towards 20 signifies a bit of complacency creeping in while a move towards 30 suggests a bit of nervousness. Break these levels and turning points are looking likely (The only problem is Lehman re-wrote the record books when the VIX went to 90 in late 2008, but that was far from any concept of “normal”.)

At 15 in mid-April we were well into overly complacent territory. Last week the VIX hit 40 and signified a high level of panic (no doubt intensified with a bit of “oh God, here we go again”). With a couple of fluctuations in between, last night we were at about 27 – a level which suggests no panic nor complacency, but certainly unease.

It is a level which suggests traders are preferring to keep high levels of cash overnight (witness last night's late Wall Street sell-off) and investors are happy to pay for put option protection (demand for which determines the VIX).

We thus move into next week with at least some trepidation. Almost forgotten in the wake of the new E720bn eurozone emergency fund has been the Greek government's specific need to rollover E18.5bn of sovereign debt on Wednesday night. Recently the squealing PIIGS have only been testing the water with bond issues as low as E1-2bn.

It will also be a busy week on the US economic data front. Lurking behind the whole Europe disaster/China tightening situation has been the question of whether the US economy is indeed continuing to show pleasing signs of recovery.

Next week we learn the Empire State manufacturing index, the housing sentiment index, long-term Treasury flows, housing starts, PPI, CPI, leading economic indicators and the Philly Fed manufacturing index. And the Fed will release the minutes of its last policy meeting on Wednesday.

We will also receive the RBA's latest minutes next week in what is a quieter week locally. We have quarterly wage data and the Westpac consumer confidence and inflation expectations surveys and not much else.

With Europe in the frame there will be interest in eurozone business and consumer confidence surveys next week, along with CPI, trade balance and current account, and Germany reports its first quarter GDP on Friday.

Japan will report its first quarter GDP on Thursday.

On the local stock front, Myer ((MYR)) will report quarterly sales numbers on Monday.

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.

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