01/09/12: In the markets, as in life, there are no guarantees but everyone is entitled to their opinion. Here’s my opinion on four major items that could have impact on markets this week:
1. A “week-in-a-glance” list of key data items over the next five days: Beginning today, the Federal Reserve issues consumer-credit data for November. On Tuesday, New Hampshire holds the first “full fledged” GOP presidential primary while Treasury Secretary Geithner begins meetings with Chinese officials in Beijing. Wednesday turns back to U.S. economic data, as the Fed releases its “beige book” survey of regional economic conditions. Thursday is a “mix” of domestic and international events, as the Commerce Department posts December retail sales and the Treasury issues its monthly budget report. In Europe, Italy and Spain will conduct debt auctions while the European Central Bank and the Bank of England meet on policy. Friday turns back to a focus on U.S. data, as the international trade balance for November is released along with The University of Michigan’s first consumer sentiment numbers for the New Year.
2. Europe, more Europe and still more Europe: In addition to the aforementioned Spanish and Italian debt auctions this week, the stalwart German economy is generating mixed economic signals. Exports there rose 2.5% in November (economists had forecast +0.5%) after falling 2.9% in October. Imports declined 0.4% in November, while the trade surplus widened sharply from October. The increase in exports contrasts with a contraction in manufacturing last month and a 4.8% slump in factory orders. And speaking of Germany, Angela Merkel and Nicolas Sarkozy are meeting today to discuss sovereign debt problems, higher unemployment and the potential financial transaction tax that France is proposing that many argue could further slow that economy. In other discussions, there is some feeling that the IMF is losing confidence that Greece’s bailout can succeed without faster fiscal reform or a bigger settlement percentage on existing debt.
3. What could place a drag on economic recovery? Iran and energy markets also have our attention. Despite tightening international sanctions, Iran has reportedly started to enrich uranium at its underground Fordo facility. Meanwhile, Bloomberg reports that a pipeline that would allow UAE crude oil to bypass the Strait of Hormuz has been delayed further because of construction difficulties and won’t be open until April. Regardless of source, the more energy product transfer that could avoid the “choke point” of the Strait, the better. Simply put, higher oil prices are like an extra “tax” on businesses and consumers that places additional “drag” on economic recovery.
4. Earnings season is starting up. A major metals manufacturer, which announced restructuring charges last week, is due to get earnings season underway today. It will be interesting to see to what degree U.S. corporate earnings will serve as a “countermeasure” to all of the uncertainty emanating from Europe. Which impact will “win out,” and what impact will this have on markets both for 2012 and beyond?
Please call or email me if you have any questions or concerns about these issues. Myself or anyone on our team would be delighted to talk with you.
Senior Vice President
Note: The opinions voiced in this material are for general information and are not intended to be specific advice. Any indices such as the S & P 500 can’t be invested into directly. Past performance is no assurance of a future result.
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