Friday’s session was another fairly lacklustre event with nothing really happening either side of the Atlantic. Stocks hovered around 0, although the Dax and CaC were stronger (0.5 to 0.8 per cent).
For the week then, the S&P500 was down about a third of a per cent – so nothing major and most markets appear to be treading water.
That wasn’t necessarily the case in other markets though and US debt markets saw some comparatively solid moves on the 10-year, with yields down about 12 bps for the week (1.76 per cent).
Similarly, we know crude posted a big drop as a result of the coordinated ‘jawboning’ effort in the wake of central bank printing efforts in Europe, the US and Japan – down $7 to $92.3.
I’m thinking that it might be a similar sort of week this week. Not necessarily in terms of exact price moves or anything, just more dictated by whatever the news flow is going to be. I mean the dataflow is thin, really thin, so I can’t see that moving markets.
On that front we are of course awaiting any decision by Spain to seek a bailout – it may come this week. Recall that Spain is being forced to seek a bailout before the European Central Bank will start the printing presses. The Spaniards for their part quite rightly want to know what conditions will be imposed on them before seeking that aid. Ahh the fun and games.
But, and assuming it's true, there was cause for more celebration overnight – or just more kicking of the can for those so inclined.
German press report that the new European bailout fund, that starts up in a couple of weeks, may have its fire power increased from the current €500 billion to perhaps something more like €2 trillion through the magic of leverage.
Sounds like a lot and it is, but recall that government spending/revenues across Europe amount to something like €6 trillion. So despite some alarmist claims, this isn’t leverage that imperils the union.
Anyway the broader point is that if true, it really should settle the issue for the market. Although having said that, initial concerns were completely irrational in the first place (causing the liquidity crisis), so anything could happen.
If I was Spain I wouldn’t necessarily be too worried though. The political mood in Europe is softening – the rhetoric less harsh. As an example, the French prime minister on Sunday called for Greece to be given more time to implement its structural reform program – echoing comments from the IMF.
Well not necessarily echoing I guess, the IMF only said it was an option. Recall the Greeks themselves want a two-year extension. But there’s more. Portugal too looks to be softening, at least considering a softening of austerity following mass protests and general public ‘fury’ at having to pay down debt. Recall that Portugal was recently given an extra year to meet targets as well. Anyway, apart from that I’m not seeing too much.
As to that data then, there is pretty much nothing for Australia. A couple of minor releases. The key data will be private sector credit on Friday. Otherwise, we see two speeches from the RBA on the September 25 and 26, although neither is likely to contain much for policy watchers.
Looking abroad there’s not too much more than that. For the US we see a few more manufacturing surveys (Richmond and Dallas Fed) and consumer confidence. The hard hitting data comes later in the week with new home sales and Durable goods on Thursday. Then on Friday we see personal income and spending. Don’t forget we also get another GDP estimate on Thursday night.
For Europe, we get the German IFO survey tonight, this gets less press than the PMIs (which aren’t that useful) but is a much better survey. German inflation follows on Wednesday with unemployment data on Thursday. Also worth watching is the business climate indicators and German retail sales.
I think that’s the big stuff, not much else. Enjoy…
Adam Carr is a leading market economist. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.
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