Weekly Reports | Jun 01 2012
By Rudi Filapek-Vandyck
Equity markets are hovering between "hope" and "despair", which in essence means nobody really knows what is going to happen next, but for the short term a positive bias is likely to provide support simply because hope springs eternal, at least for the short term.
Today marks the first day of June. May was dismal and if today's PMI reports for May around the globe are anything to go by, the immediate outlook is for more dismal data. A quick run down of PMI surveys that have been released today is best summed up with two observations: further declines and weaker than expected. This goes for the release this morning in Australia, for the release in Korea and for both releases in China. It's a brave soul who dares to issue a contrarian call for the releases in the US and Europe later today.
Yet, and as indicated in today's Overnight Report, more weaker than expected economic data and indicators may well be just what the doctor ordered for June as it will increase the odds for more intervention and support from central banks and this will keep a natural level of support under falling risk assets. Observe, for example, how the Australian share market dived deep into the red following the release of the local and the first of the two Chinese PMI releases in the morning, yet as I write this story the trend is very much to the upside and major indices are looking at single digit points losses only.
The same principle might apply to tonight's PMI survey in the US and the all-important non-farm payrolls. If I were a betting man I'd put my money on a disappointing read, which is likely to push equities lower at first, but it wouldn't come as a surprise if the buyers would then move in aggressively. Market consensus sits at 150,000 new jobs being created but Goldman Sachs already lowered its own estimate to 125,000 today. They're probably not the only ones resetting to a lower level following a disappointing weaker than expected read from the ADP private sector jobs survey yesterday.
Hope springs eternal and the worse this global economic slowdown gets, the more likely we will see extra money printing and other forms of support from central bankers and governments. It's the irony of the world we live in today.
Data in the US today also include vehicle sales and personal income and spending for April.
Next week both the UK and New Zealand take a day off on Monday (Australians have their own day off the week thereafter), while the US will report on factory orders for April. On Tuesday it's "global services PMI day" and the Reserve Bank in Australia might well surprise again. Fifty basis points? There are quite a few experts around who believe this scenario should not be dismissed.
Australian data releases on Tuesday include exports and the current account. The UK market will remain closed on Tuesday too.
One day later and we will be talking about what the ECB might do while the Fed will release its always insightful Beige Book. In Australia we will see the release of Q1 GDP growth estimate, while Europe will also reveal its own Q1 GDP number plus German industrial production for April.
On Thursday we can fret about whether official labour market data are truly painting a genuine picture here in Australia (and why economists are on the wrong side EVERY month) while this time the Bank of England will have something to say about QE, inflation and interest rates. The US will see an update on consumer credit (student loans hello?).
On Friday we have housing finance and trade balance for April in Australia, Q1 GDP in Japan, inflation, retail sales industrial production and trade balance data in China, plus some minor releases in the UK, Germany and in the US.
And lastly, myself and the creative designer sat down a while ago to put our vision about economists (in general) on paper. Below is the end result of that exercise.
To be continued… 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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