Weekly Reports | Sep 17 2010
By Greg Peel
The flow of economic data out of the US was positive in the first quarter 2010, negative in the second, and now evenly balanced in the third. The result is an S&P 500 index sitting squarely at its 200-day moving average wondering what on earth to do next. One gets the feeling that it really, really wants to go up, but recent mixed data, suggesting US growth is flat at best, is not providing enough impetus.
Can it be sold? The Fed stands ready to implement QE2 at the first sign of trouble and the Obama Administration is now rolling out its pre-mid term election fiscal policies aimed at somehow creating new jobs. This would tend to suggest the downside is also limited. M&A activity also has the bulls revved up, but ongoing global uncertainty and a total lack of investor interest has Wall Street stuck in limbo. Despite clearly positive Australian data, we remain firmly attached to Wall Street at the hip. The Aussie dollar is the beneficiary, but that means Australia's exporters are the losers.
Limbo.
We may learn more from the Fed on Tuesday when it releases its latest FOMC statement on monetary policy. My guess is it will be little changed – rates will remain steady for near forever, and QE will only be implemented if the US economy takes a clear dive, which it hasn't. But then next week in the US is housing week.
Once past the CPI and Michigan Uni survey tonight, next week in the US brings the housing market sentiment index, the Fannie/Freddie house price index, housing starts and new and existing home sales. Quite frankly there is scope in this suite of numbers to cause a sharp correction, or a break-out. Stay tuned. The Conference Board will also release its leading economic indicator, and we'll have durable goods on Friday.
There's not a lot going on in the rest of the world. The RBA will release the minutes of its last meeting on Tuesday, which will be a carbon copy of the previous minutes. Westpac will release its leading economic index on Wednesday and that's about it. Japan will be closed on Monday and Thursday.
Lots of ex-divs again in the local market next week, along with a smattering of AGMs and out-of-season profit results, the highlight of which will be David Jones ((DJS)) on Wednesday.
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.
