Despite a very good ISM print and upward revised IMF forecasts for the South Korean economy stocks are in the red this morning. Look for a test of the 50DMA in S&P 500 today.
Calendar
|
GMT |
Event |
Saxo Bank |
Consensus |
Previous |
|
07:30 |
SW Riksbank Interest Rate |
0.75% |
0.50% |
|
09:00 |
EC GDP YoY (2Q) |
1.0% |
1.0% |
1.0% |
|
11:45 |
EC ECB Announces Interest Rates |
1.00% |
1.00% |
1.00% |
|
12:30 |
US Nonfarm Productivity QoQ (2Q F) |
-1.9% |
-0.9% |
|
12:30 |
Initial Jobless Claims (AUG 28) |
475K |
473K |
|
12:30 |
Continuing Jobless Claims (AUG 21) |
4450K |
4456K |
|
14:00 |
Factory Orders MoM (JUL) |
0.3% |
0.2% |
-1.2% |
|
14:00 |
Pending Home Sales MoM (JUL) |
-1.0% |
-2.6% |
What's going on?
The Swedish Riksbank is expected to raise rates a notch to 0.75% as the economy continues higher. Sweden has so far managed to avoid any housing-related problems and the OECD leading indicator is still pointing north.
Factory orders from the US are expected to rise slowly today to 0.3% MoM. Factory orders are comprised of durable and nondurable orders, and we already know that durable goods orders rose 0.3% MoM in July (though revisions are often released together with the factory orders report).
Consensus is looking for US pending home sales to decrease slowing as the housing market stabilizes (at a very low level!) following the homebuyer tax credit interruptions. House prices will still be affected though and we don’t expect (Case-Shiller) prices to fall for another couple of months.
The ECB meeting will be uneventful if you are looking for rate hikes. The main refinancing rate will be kept at 1% and will not be increased anytime soon despite Trichet’s attempts to put on a brave face about the health of the economy. Germany is basically the only sound (major) country in the Eurozone and growth rates will come down again.
Market Musings
Automatic Data Processing (ADP), which provides their own estimate of US private payrolls, saw net job losses of 10,000 in August (Saxo: 5K, consensus: 15K). The goods-producing sector has now managed to shed jobs on net for 41 months in a row (-40,000 in August) according to ADP!
Yesterday’s labour market report reinforces our view that the change in private payrolls will be roughly flat when the Bureau of Labor Statistics (BLS) releases their estimate tomorrow in the all-important employment report.
Construction spending declined 1% MoM (Saxo: -1.2%, consensus: -0.5%) with residential construction down 2.5%. Hardly surprising given how few housing starts we’ve seen in recent months. Expect this to continue as the expiration in April of the homebuyer tax credit in April will weigh on new housing projects.
US domestic vehicle sales disappointed yesterday with a print of 8.66M vs. 8.85M expected by consensus and 9.11M prior. A 4.9% drop does not bode well for August retail sales out later this month as car sales are roughly 17% of overall retail sales.
Equities
Equities rallied on the back of a better than expected number in the ISM survey as expected. We still believe that we will continue to get a string of ugly numbers coming out from the US, and later in the year Europe as well. However for the very short term we need to pass the 50 DMA; we find it very likely that this will happen and within a reasonable span of time we are going to test a level around 1100 in S&P500 and this would in our mind mark a top from where we would be heading lower again. In yesterday’s rally cyclical stocks were amongst the best performing, while defensives where left behind.