(MONDAY 30TH MAY - 07.57 - JAMES GERRISH)...US stocks finished Fridays session higher with the DOW JONES up +38 pts while the S&P 500 gained +0.4%. For the week, the US market was flat while the All Ords were down 1%, the AUD/USD was up +0.2% and Gold was up +1.6%.
The USD was unloved on Friday after pending home sales missed the mark showing a drop of 11.6% to be 26.5% lower than a year ago. This prompted the assumption that US economic data is too weak for any tightening measures to be rolled out hence the slide in the USD - this prompted buying back into commodities. The USD has actually had a pretty good bounce from its lows but I'm a believer that the US will over stimulate and this will put continued pressure on the Greenback.
Looking around the markets, it seems the fall of the USD made traders feel a little more comfortable - not surprising given its what we've been used to for so long now. The Commodity Index was higher led by Copper, Gold & Crude while the US indices look like they have found a short term low.
US ECONOMIC DATA
Has been pretty woeful to say the least and this is shown by the Citigroup Economic Surprise Index below.
However there was an interesting point made by JP Morgan's Thomas Lee, who argues that the economic data has been so consistently disappointing, that a rebound in the Citi Economic Surprise Index (which measures the data against expectations) is practically guaranteed.
Again, it's not that the economy will rebound, but the economy will rebound vs. expectations, which is actually what matters to markets.We have found economic surprise indices (CESI, the Citi Economic Surprise Index in this case, CESIUSD index) to be a historically reliable signal (Bloomberg)
WEEK AHEAD
There's a fair bit of data that could drive markets over the next 2 weeks - this week we'be got:
Monday - Business Indicators Released from the Bureau of Statistics with the number expected to be soft - conditions impacted by floods + high Aussie + low consumer sentiment however I wouldn't expect the print to be market moving particularly given US markets closed tonight.
Tuesday - RBA to release private sector credit figures and we'll also get a better handle on house prices with the RP Data and Rismark numbers out. There has been a lot of talk about the weak housing market with some pushing the line that the East Coast of Australia is in a recession
