Daily Market Reports | Jun 04 2012
By Rudi Filapek-Vandyck
Apparently, and I always forget to check this fact with my Icelandic friends, the people of Iceland have eleven different words to describe the word "white" in their native language. There's at least one poem from a local poet who uses them all. Imagine the troubles your standard translator has to go through to put that one in plain English – forget about keeping up the rhyme!
It occurred to me on Saturday morning (Sydney time) that it's probably time we set up an "Academie Anglaise" to come up with some extra terms for "bad". Because, after all, it's in such times as these that we must ask: who's brave enough to make the call it's going to be all over by the end of the year?
In the absence of more gradations being available for "bad" , I am going to stick with the term used by economists at CIBC on the day: "horrific". The word reminds me of my (much) younger years, when I and my friends used to travel through the country to see concerts by a Scottish punk band at the time called The Bollock Brothers. One of their mini hits was "Horror Movies". Back to financial markets: horrific it is.
On Friday I said that if I were a betting man I'd take the bet that non-farm payrolls were likely to disappoint market expectations. I also said that -irony, oh irony- this could actually be good news as buyers might move back in on expectations of central bank action coming sooner rather than later. What I didn't foresee, however, was that the released set of numbers would not fall under the label "bad", "disappointing" or "below expectations", they were, as put by CIBC, "horrific".
And thus buyers did not move in on Friday, unable to put that "horrific" experience aside on the day and equities thus tanked while Sydney was experiencing a very wet weekend. My first Tweet of the morning shall be: Are you as curious as I am to see how all those market commentators who were calling The Bottom last week will respond?
I am not going through the numbers, three days after the fact, but remember the US economy needs average new jobs created to the tune of 250,000 to keep up with demographics and ultimately push the unemployment rate down, while also absorbing drop-outs rejoining the workforce in better times. We are truly nowhere near such achievement.
Consumer spending makes up more than 50% of the US economy (not the oft reported 70% which includes spending on healthcare, which is misleading).
So what we have on the table right now is slowing economies in Brazil, India and China, ongoing disintegration risks in Europe and wobbly looking performances in Japan, the UK and the US. It's difficult to see how and why some experts are talking "bull market", but hey, they are still around. Their key mantra is now "central bank support".
A quick run down of some of the postings on my Twitter newsfeed tells the whole story for Monday morning and the week ahead:
– Investors Look To Central Banks For Help For Third Year Running (WSJ)
– Soros: Europe must solve crisis in 3 months http://on.mktw.net/LnIJYC
– Latest poll shows ALP's slogan at the next election should be: “You think we’re the worst government ever? Just wait for the next one!”
– Sam Henderson: Stocks set to slide: Australian shares poised to slip below the critical 4000 points
And some bright news for you sports fans out there: Stosur reaches French Open quarters http://bit.ly/LdI8My
Ok, one extra headline from Danske Bank: No circuit breaker in sight, debt crisis expected to worsen before it improves
In Australia all the action is in predictions for what the Reserve Bank might decide on Tuesday. Some economists looking for no change previously are now predicting a 25bp cut. Some economists looking for 25bp previously are now calling for another 50bp cut, including AMP strategist Shane Oliver. And the same applies to the ECB meeting later this week, with economists now calling for a 25bp cut over there as well.
On Monday, the local calendar looks pretty busy. We'll have some insight to help put together the GDP enigma, with inventories and company profits released at 11:30AEST, plus there's ANZ Job Ads at the same time.
Both the UK and New Zealand take a day off today (Australians have their own day off next week). The US will report on factory orders for April.
On Tuesday it's "global services PMI day" plus the Reserve Bank in Australia meeting. 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 and Q1 GDP in Japan. On Saturday we will be a little wiser about inflation, retail sales industrial production and trade balance data in China.
Finally, here's my view on all those economists who manage to step into the limelight with predictions as if they have it all figured:
Who was it again that said economists have a job to make weathermen look good?
Your Editor will be on Sky Business this week on Thursday (Lunch Money, between 12-1pm).
P.S. Experienced trader on CNBC: there's no catalyst to arrest the fall today. We're staying put on the sidelines as not even volatility is high enough to take positions with any conviction.
P.S. II – Greg Peel will be back next week.
For further global economic release dates and local company events please refer to the FNArena Calendar.
