(FRIDAY 9TH SEPTEMBER- 07:53 - JAMES GERRISH)...The DOW JONES fell -119pts overnight while the S&P 500 was off by -1.06%. Locally, the SPI FUTURES are signalling a drop of -17pts when trading kicks off this morning.
A couple of market moving events today with the speech by US President Barack Obama at 9am this morning while we also get China Inflation data out around lunch time.
Overnight we had Fed Treasurer Ben Benanke speak and it seemed the mkt was a little disappointed that he delivered the same message that had been dished out in Jackson Hole - that he will ensure that strong growth returns to the US but was reluctant to say what tools would be employed. Still, this shouldn't really come as a surprise given that the FOMC meet at the end of September at an extended 2 day meeting which will presumably outline the tools available. (eg - extended bond maturities etc etc)
From a fiscal standpoint, the speech by Barrack Obama this morning is likely to outline small business tax cuts + proposed changes to other tax legislation to cut some of the loopholes currently enjoyed by big business. He'll also discuss plans to tackle unemployment which will certainly be interesting. He's a got a golden tongue however I think the mkt is sick of rhetoric by leaders and wants numbers + targets + clarity about a strategy to tackle the major issues the US economy is facing. I doubt we'll get it and the MKT will react accordingly!
CHINESE INFLATION
Chinese Inflation and Industrial Production data is out today with expectations for CPI to rise 6.2% year on year. This is down from 6.5% printed in July and if it does print as expected this will ad weight to calls that inflation in China has peaked which should see the end of tightening measures. (a positive for commodities + resource stocks)
If we do see a print significantly lower than 6.2%, then we'll see some nerves emerge about China having some type of hard landing. A print significantly higher and we'll get concern about more aggressive tightening - so this is an important print which needs to come in close to expectations to be a positive catalyst for our mkt.
US DATA
The economic indicators fairing the worst at the moment are those that are directly/indirectly linked to confidence or lack of. When we look at underlying tier one economic data (PMIs, export data, GDP etc) its not supporting the view that the US will dip back into recession at this stage (of course this can change but the most likely reason for this would be that confidence continues to erode). As the OECD rightly stated last night 'the policy imperative is to rebuild confidence'.....This is the question that the mkt will be asking during Obama's speech this morning.
Looking at the actual data overnight it continued to be mixed but hardly alarming. Initial jobless claims ticked higher by 2k for the month to 414,000 however the US trade deficit narrowed sharply in July on a surge in exports out of the US.
Exports unexpectedly jumped 3.6% following two straight months of decline with $US126.9 billion worth of goods and $US51.1 billion of services being exported from the States. Imports fell for the third consecutive month, by 0.2 per cent. The decline was almost entirely due to a drop in imported petroleum products, as both prices and volumes declined.
We also saw US consumer credit growth come in higher than expected, rising by $US11.97 billion v expectation of +6 Bil. This fits in with the recent data we've seen on consumer spending which was unexpectedly positive.
There is no doubt that Us data is lumpy and employment is a real concern, however the main take out is that data is not signalling another recession and at the moment, I think the market is pricing in a high chance of one.
AROUND THE GROUNDS ON FRIDAY...!
AROUND THE GROUNDS ON FRIDAY...!
NO MODEL PORTFOLIO UPDATES
